Company

Who We Are
Three billion times a day, P&G brands touch the lives of people around the world. We are one of the largest and
strongest portfolios of trusted, quality, leadership brands. At P&G, the people who develop and build the brands are the
foundation of our success.

Procter and gamble:

Procter & Gamble Co. (P&G, NYSE: PG) is a Fortune 500 American multinational
corporation headquartered in Cincinnati, Ohio.[2] that manufactures a wide range of consumer goods.
As of 2008, P&G is the 8th largest corporation in the world by market capitalization and 14th largest
US company by profit. In early 2010, P&G reached 4th largest corporation in the US by market
capitalization, surpassed only by Exxon Mobil, Microsoft, and Walmart. It is 10th in Fortune's Most
Admired Companies list (as of 2007).[3][4] P&G is credited with many business innovations
including brand management and the soap opera.

According to the Nielsen Company, in 2007 P&G spent more on U.S. advertising than any other
company; the $2.62 billion spent by P&G is almost twice as much as that spent by General Motors,
the next company on the Nielsen list.[5] P&G was named 2008 Advertiser of the Year by Cannes
International Advertising Festival

History:
The development of a separate board of directors to manage the company has occurred incrementally
and indefinitely over legal history. Until the end of the 19th century, it seems to have been generally
assumed that the general meeting (of all shareholders) was the supreme organ of the company, and
the board of directors was merely an agent of the company subject to the control of the shareholders
in general meeting.[8]

However, by 1906, the English Court of Appeal had made it clear in the decision of Automatic Self-
Cleansing Filter Syndicate Co v Cunningham [1906] 2 Ch 34 that the division of powers between the
board and the shareholders in general meaning depended on the construction of the articles of
association and that, where the powers of management were vested in the board, the general
meeting could not interfere with their lawful exercise. The articles were held to constitute a contract by
which the members had agreed that "the directors and the directors alone shall manage."[9]

The new approach did not secure immediate approval, but it was endorsed by the House of
Lords in Quin & Axtens v Salmon [1909] AC 442 and has since received general acceptance. Under
English law, successive versions of Table A have reinforced the norm that, unless the directors are
acting contrary to the law or the provisions of the Articles, the powers of conducting the management
and affairs of the company are vested in them.

The modern doctrine was expressed in Shaw & Sons (Salford) Ltd v Shaw [1935] 2 KB 113 by Greer
LJ as follows:

"A company is an entity distinct alike from its shareholders and its directors. Some of its powers may, according
to its articles, be exercised by directors, certain other powers may be reserved for the shareholders in general
meeting. If powers of management are vested in the directors, they and they alone can exercise these powers.
The only way in which the general body of shareholders can control the exercise of powers by the articles in the
directors is by altering the articles, or, if opportunity arises under the articles, by refusing to re-elect the directors
of whose actions they disapprove. They cannot themselves usurp the powers which by the articles are vested in
the directors any more than the directors can usurp the powers vested by the articles in the general body of
shareholders."

It has been remarked that this development in the law was somewhat surprising at the time.

Our History in Pakistan:

Procter & Gamble Pakistan, headquartered in Karachi, commenced operations in Pakistan in 1991. Our
goal was to become the finest global consumer goods company operating locally in Pakistan. To fulfill
this goal, we are serving Pakistani consumers with premium quality brands including Head & Shoulders,
Pantene, Ariel, Safeguard, Pampers and Always that strive to make everyday lives better.
With commitment came growth, and in 1994 we acquired a soap-manufacturing facility sprawling seven
acres of land at Hub, Balochistan. In 2002, the plant tripled its soap-manufacturing capacity with an
investment of $3 million. In 2004, with an initial investment of about half a million U.S. dollars, a PUR
facility was set up with a production capacity of 50 million sachets of the water purifier annually. The
P&G Hub plant is the first of its kind in the world. It provides people access to safe drinking water and is
able to export millions of liters across the globe. Today, the Hub plant is equipped with state-of-the-art
manufacturing technologies and quality assurance processes and systems, reflecting the company's
values of safe, hygienic and ethical manufacturing practices.

P&G Pakistan headquarters are consistently upgraded to the company's progressive values. Investments
of $ 1.6 million have taken place in the work-space environment to date. The P&G Pakistan head office
today hosts high-speed digital networks and advanced systems and facilities.

As a company with vast global experience, P&G has always believed in the potential Pakistan has as a
country. Since 1989, the total amount invested by P&G Pakistan in assets, working capital and market
development is approximately $ 100 million. In addition, Procter & Gamble contributed Rs 4.3 billion to
the national exchequer in the form of taxes and duties in 07/08, increasing 22 percent over the previous
year.

Strengthening its commitment to invest further in Pakistan, P&G recently broke ground for its second
manufacturing facility in Pakistan. The launch of this manufacturing facility is testimony of P&G’s
successful history in the country and symbolizes P&G’s confidence that Pakistan will continue to
provide a stable and conducive business environment over the long-term. This project involves an
investment of about US$100 million and is P&G’s largest single investment in the country to date.The
facility is expected to improve local industrialization prospects by creating tremendous potential
opportunity of business over the next few years. With the plant occupying only one-third of the total 25
acres of land acquired, provision has been built in for future expansion projects.

P&G has attracted outstanding individuals since the day it began operations in Pakistan. The company
presently employs more than 300 people, 99 percent of which are Pakistanis and creates more than 4,000
jobs indirectly in Pakistan. All this makes P&G a more locally focused company.

Purpose & People:

The Power of Purpose

Companies like P&G are a force in the world. Our market capitalization is greater than
the GDP of many countries, and we serve consumers in more than 180 countries. With
this stature comes both responsibility and opportunity. Our responsibility is to be an
ethical corporate citizen—but our opportunity is something far greater, and is embodied
in our Purpose.

P&G’s Purpose Statement articulates a common goal that inspires us daily:

Our Purpose works to unify us in a common cause and growth strategy. It is powerful
because it promotes a simple idea to improve the lives of the world’s consumers every
day. P&G grows by touching and improving more consumers’ lives in more parts of the
world...more completely. While this statement defines our commercial opportunity, our
culture reflects the broader opportunity of improving lives through and beyond our
branded products and services.

the simple, inspiring way to think about this opportunity is that P&G brands serve about
four billion of the six and a half billion people on the planet today. Before P&G can serve
the remaining two and a half billion profitably, we can reach them altruistically. We can
improve their lives in ways that enable them to thrive, to increase their quality of living
and, over time, to join the population of consumers we serve with P&G brands. Through
our overall Live, Learn & Thrive™ cause program, initiatives such as Children’s Safe
Drinking Water and Pampers 1 Pack = 1 Vaccine are examples of how we are improving
the lives of millions of people every day.

Our shared Purpose attracts and unites an extraordinary group of people, P&Gers,
around the world—the most diverse workforce in P&G history. Together, we represent
around 140 nationalities. Our recruiting and development philosophy to “build from
within” fosters a strong culture of trust and shared experiences. Our diversity, our
shared culture and our unified Purpose are the defining elements that

Classification
Main articles: executive director and non-executive director

A board of directors is a group of people elected by the owners of a business entity who have
decision-making authority, voting authority, and specific responsibilities which in each case is
separate and distinct from the authority and responsibilities of owners and managers of the business
entity. The precise name for this group of individuals depends on the law under which the business
entity is formed.

Directors are the members of a board of directors. Directors must be individuals. Directors can be
owners, managers, or any other individual elected by the owners of the business entity. Directors who
are owners and/or managers are sometimes referred to as inside directors, insiders or interested
directors. Directors who are managers are sometimes referred to as executive directors. Directors
who are not owners or managers are sometimes referred to as outside directors, outsiders,
disinterested directors, independent directors, or non-executive directors.

Boards of directors are sometimes compared to an advisory board or board of advisors (advisory
group). An advisory group is a group of people selected (but not elected) by the person wanting
advice. An advisory group has no decision-making authority, no voting authority, and no responsibility.
An advisory group does not replace a board of directors; in other words, a board of directors
continues to have authority and responsibility even with an advisory group.

The role and responsibilities of a board of directors vary depending on the nature and type of
business entity and the laws applying to the entity (see types of business entity). For example, the
nature of the business entity may be one that is traded on a public market (public company), not
traded on a public market (a private, limited or closely held company), owned by family members (a
family business), or exempt from income taxes (a non-profit, not for profit, or tax-exempt entity). There
are numerous types of business entities available throughout the world such as a corporation, limited
liability company, cooperative, business trust, partnership, private limited company, and public limited
company.

Much of what has been written about boards of directors relates to boards of directors of business
entities actively traded on public markets.[6] More recently, however, material is becoming available for
boards of private and closely held businesses including family businesses.[7]
Board of directors
From Wikipedia, the free encyclopedia
"Board Room" redirects here. For the "Board Room" member lounge, see Alaska Airlines.

A board of directors is a body of elected or appointed members who jointly oversee the activities of
a company or organization. The body sometimes has a different name, such as board of trustees,
board of governors, board of managers, or executive board. It is often simply referred to as "the
board."

A board's activities are determined by the powers, duties, and responsibilities delegated to it or
conferred on it by an authority outside itself. These matters are typically detailed in the
organization's bylaws. The bylaws commonly also specify the number of members of the board, how
they are to be chosen, and when they are to meet.

In an organization with voting members, e.g., a professional society, the board acts on behalf of, and
is subordinate to, the organization's full assembly, which usually chooses the members of the board.
In a stock corporation, the board is elected by the stockholders and is the highest authority in the
management of the corporation. In a non-stock corporation with no general voting membership, e.g., a
university, the board is the supreme governing body of the institution.[1]

Typical duties of boards of directors include[2][3]

 governing the organization by establishing broad policies and objectives;

 selecting, appointing, supporting and reviewing the performance of the chief executive;

 ensuring the availability of adequate financial resources;

 approving annual budgets;

 accounting to the stakeholders for the organization's performance.

The legal responsibilities of boards and board members vary with the nature of the organization, and
with the jurisdiction within which it operates. For public corporations, these responsibilities are
typically much more rigorous and complex than for those of other types.

Typically the board chooses one of its members to be the chairman.

Election and removal

In most legal systems, the appointment and removal of directors is voted upon by the shareholders in
general meeting.

Directors may also leave office by resignation or death. In some legal systems, directors may also be
removed by a resolution of the remaining directors (in some countries they may only do so "with
cause"; in others the power is unrestricted).
Some jurisdictions also permit the board of directors to appoint directors, either to fill a vacancy which
arises on resignation or death, or as an addition to the existing directors.

In practice, it can be quite difficult to remove a director by a resolution in general meeting. In many
legal systems, the director has a right to receive special notice of any resolution to remove him or her;
[12]
the company must often supply a copy of the proposal to the director, who is usually entitled to be
heard by the meeting.[13] The director may require the company to circulate any representations that
he wishes to make.[14] Furthermore, the director's contract of service will usually entitle him to
compensation if he is removed, and may often include a generous "golden parachute" which also acts
as a deterrent to removal.

In a recent academic study that was published in the Journal of Finance, Drexel University’s LeBow
College of Business professors Jie Cai, Jacqueline Garner, and Ralph Walkling examined how
corporate shareholders voted in nearly 2,500 director elections in the United States. They found that
directors received fewer votes from shareholders when their companies performed poorly, had excess
CEO compensation, or had poor shareholder protection. They also found that directors received fewer
votes when they did not regularly attend board meetings or received negative recommendations from
RiskMetrics (a proxy advisory firm). This evidence suggests that some shareholders express their
displeasure with a company by voting against its directors. The article also shows that companies
often improve their corporate governance by removing poison pills or classified boards and by
reducing excessive CEO pay after their directors receive low shareholder support.[15]

Exercise of powers
The exercise by the board of directors of its powers usually occurs in board meetings. Most legal
systems require sufficient notice to be given to all directors of these meetings, and that aquorum must
be present before any business may be conducted. Usually, a meeting which is held without notice
having been given is still valid if all of the directors attend, but it has been held that a failure to give
notice may negate resolutions passed at a meeting, because the persuasive oratory of a minority of
directors might have persuaded the majority to change their minds and vote otherwise.[16]

In most common law countries, the powers of the board are vested in the board as a whole, and not in
the individual directors.[17] However, in instances an individual director may still bind the company by
his acts by virtue of his ostensible authority (see also: the rule in Turquand's Case).

Duties
Because directors exercise control and management over the organization, but organizations
are (in theory) run for the benefit of the shareholders, the law imposes strict duties on directors
in relation to the exercise of their duties. The duties imposed on directors are fiduciary duties,
similar to those that the law imposes on those in similar positions of trust: agents andtrustees.
 The duties apply to each director separately, while the powers apply to the board jointly. Also,
the duties are owed to the company itself, and not to any other entity.[18] This does not mean that
directors can never stand in a fiduciary relationship to the individual shareholders; they may well
have such a duty in certain circumstances.[19]

Management and staff

The board of directors of Procter & Gamble currently has thirteen members: Alan Lafley, Robert A.
McDonald, Charles Lee, Ralph Snyderman, M.D., Margaret Whitman, James McNerney,Lynn
Martin, Johnathan Rodgers, Ernesto Zedillo, Scott Cook, Rajat Gupta, Patricia A. Woertz,
and Kenneth Chenault.[7]

In October 2008, P&G was named one of "Canada's Top 100 Employers" by Mediacorp Canada Inc.,
and was featured in Maclean's newsmagazine. Later that month, P&G was also named one
of Greater Toronto's Top Employers, which was announced by the Toronto Star newspaper.[8]

Productions
Procter & Gamble produced and sponsored the first radio soap operas in the 1930s (Procter &
Gamble's being known for detergents (soaps) was probably the genesis of the term "soap opera").
When the medium switched to television in the 1950s and 1960s, most of the new serials were
sponsored and produced by the company. The serial The Young and the Restless is currently
broadcast on CBS and is still partially sponsored by Procter & Gamble. If As The World Turns is not
picked up by another network, The Young and the Restless, will be the only soap left that is partially
sponsored by Procter & Gamble.

These past serials were produced by Procter & Gamble:

 Another World  Guiding Light (TeleNext Media-produced in

its last 2 years)
 As The World Turns
 Lovers and Friends / For Richer, for Poorer
 The Brighter Day
 Our Private World
 The Catlins
 Search for Tomorrow
 The Edge of Night
 Somerset
 The First Hundred
Years  Texas

 From These Roots  Young Doctor Malone

Procter & Gamble also was the first company to produce and sponsor a prime-time show, a 1965
spinoff of the daytime soap opera As the World Turns called Our Private World. PGP also
produced Shirley, a prime-time NBC series starring Shirley Jones, in 1979; it lasted thirteen episodes.
They also produced TBS' first original comedy series, Down to Earth, which ran from 1984 to 1987
(110 episodes were produced). They also distributed the syndicated comedy series Throb. Procter &
Gamble Productions originally co-produced Dawson's Creek with Sony Pictures Television but
withdrew before the series premiere due to early press reviews. It also produced the 1991 TV
movie A Triumph of the Heart: The Ricky Bell Story, which was co-produced by The Landsburg
Company. It also produces the People's Choice Awards.

In addition to self-produced items, Procter & Gamble also supports many Spanish-language novellas
through advertising on networks such as Univision, Telemundo, Telefutura, and Azteca America.
Procter & Gamble was the one of the first mainstream advertisers on Spanish-language TV during the
mid-1980s.[citation needed]

In 2008, P&G expanded into music sponsorship when it joined Island Def Jam to create Tag Records,
named after a body spray that P&G acquired from Gillette.

Operations
As of July 1, 2007, the company's operations are categorized into three "Global Business Units" with
each Global Business Unit divided into "Business Segments" according to the company's March 2009
earnings release.

 Beauty Care

 Beauty segment

 Grooming segment

 Household Care

 Baby Care and Family Care segment

 Fabric Care and Home Care segment

 Health and Well-Being

 Health Care segment

 Snacks, Coffee, and Pet Care segment

Manufacturing operations are based in the

following regions:
 United States  Europe

 Canada  China (31 wholly-owned factories) and other parts of

Asia
 Mexico
 Africa
 Latin America
  Australia

Brands with net sales of more than US$1 billion annually

 Always feminine hygiene products, including maxi pads, pantiliners(sometimes called Alldays),
and feminine wipes

 Ariel laundry detergent

 Bounty paper towels, sold in the United States and Canada

 Braun, a small-appliances manufacturer specializing in electric razors, coffeemakers, toasters,

and blenders

 Charmin bathroom tissue and moist towelettes

 Crest toothpaste

 Dawn dishwashing detergent

 Downy fabric softener and dryer sheets

 Lenor fabric softener

 Duracell batteries and flashlights

 Gain fresh smelling liquid and powder laundry detergents, liquid fabric softener and dryer sheets

 Gillette, variety of razors for men and women, shaving cream for men, body wash for men,
shampoo for men, deoderant and anti-perspirant for men

 Head & Shoulders shampoo

 Iams dog and cat foods

 Olay Personal and beauty products

 Oral-B inter-dental products

 Pampers & Pampers Kandoo disposable diapers and moist towelettes

 Pantene haircare products

 Pringles potato crisps and wheat crisps

 Tide variety of liquid and powder laundry detergents, stain remover for laundry and stain remover
pen

 Wella hair care products

Brand management
 Brand management is the application of marketing techniques to a specific product, product line,
or brand. It seeks to increase the product's perceived value to the customer and thereby increase
brand franchise and brand equity. Marketers see a brand as an implied promise that the level
of quality people have come to expect from a brand will continue with future purchases of the
same product. This may increase sales by making a comparison with competing products more
favorable. It may also enable the manufacturer to charge more for the product. The value of the
brand is determined by the amount of profit it generates for the manufacturer. This can result from
a combination of increased sales and increased price, and/or reduced COGS (cost of goods
sold), and/or reduced or more efficient marketing investment. All of these enhancements may
improve the profitability of a brand, and thus, "Brand Managers" often carry line-
management accountability for a brand's P&L (Profit and Loss) profitability, in contrast to
marketing staff manager roles, which are allocated budgets from above, to manage and execute.
In this regard, Brand Management is often viewed in organizations as a broader and more
strategic role than Marketing alone.

 The annual list of the world’s most valuable brands, published by Interbrand and Business Week,
indicates that the market value of companies often consists largely of brand equity. Research
by McKinsey & Company, a global consulting firm, in 2000 suggested that strong, well-leveraged
brands produce higher returns to shareholders than weaker, narrower brands. Taken together,
this means that brands seriously impact shareholder value, which ultimately makes branding
a CEO responsibility.

 The discipline of brand management was started at Procter & Gamble PLC as a result of a
famous memo by Neil H. McElroy

Principles of brand management

A good brand name should:

 be protected (or at least protectable) under trademark law.

 be easy to pronounce.

 be easy to remember.

 be easy to recognize.

 be easy to translate into all languages in the markets where the brand will be used.

 attract attention.

 suggest product benefits (e.g.: Easy-Off) or suggest usage (note the tradeoff with strong
trademark protection.)

 suggest the company or product image.

 distinguish the product's positioning relative to the competition.

  be attractive.

 stand out among a group of other brands.

Awards and Recognitions:

Each day, we strive to touch and improve the lives of the world’s consumers. That is our
single focus and we are humbled when we are recognized by leading publications and
organizations for these efforts.

• P&G was ranked 3rd on Barron’s “World’s Most Respected Companies 2010” list, maintaining
its position from the 2009. This marks the sixth consecutive year the company has been
recognized.

• Fortune Magazine ranked P&G #8 on its “America’s Most Admired” list and #6 on its
“Global Most Admired” list. P&G was also listed #1 in the Soaps and Cosmetics industry
category for the fourth successive year. This accomplishment marks the 26th consecutive
year that P&G has participated in this widely-recognized survey that honors those companies
with the best reputations.

• United Way Worldwide recognized P&G for our commitment to touch and improve lives,
including P&G’s contributions of more than $100 million annually in cash and product
donations, raising more than $17.6 million for communities through the United Way campaign
in Cincinnati and elsewhere. P&G received three individual Summit Awards – for community
investment, community impact and community volunteerism.

• The National Association for Female Executives (NAFE) recognized P&G as one of its
“Top Companies for Executive Women” for the eighth consecutive year. P&G’s ranking was
based on the advancement of women, the recognition of top female role models at top
management levels, and the commitment to talent development and diversity programs.

• DiversityInc Magazine ranked P&G No. 18 on The 2010 DiversityInc Top 50 Companies for
Diversity® list. The company was also ranked No.6 on The DiversityInc Top 10 Global
Diversity Companies and No. 3 on The DiversityInc Top 10 Companies for People with
Disabilities.

External Recognition:
• Ranked #6 among the “World’s Most Admired Companies”
• Ranked #2 among “Top Companies for Leaders”
• Consistent #1 ranking within industry on “Most Admired” list for 24 of 25 total years and for
12 years in a row

• Ranked #3 on the “World’s Most Respected Companies List”

• Ranked #12 among the “World’s Most Innovative Companies”

• Named to worldwide survey of Top 20 Best Companies for Leaders

• Named to list of the Global 100 Most Sustainable Corporations in the World, with top rankings
from 2000–2009

• Recognized by the National Association for Female Executives as one of the Top 10
Companies for Executive Women

• Recognized as one of the 100 Best Companies for Working Mothers and Top 20 Best
Companies for Multicultural Women

• Recognized as one of the 40 Best Companies for Diversity

• Recognized as one of the Top 50 Companies for Diversity

• Ranked #3 among the Top 10 Companies for Global Diversity
Supplier diversity is a fundamental business strategy at P&G. In 2009, P&G spent more than
$2 billion with minority- and women- owned businesses. Since 2005, P&G has been a member
of the Billion Dollar Roundtable, a forum of 16 corporations that spend more than $1 billion
annually with diverse suppliers.

P&G at a Glance

Net Sales
by GBU(1)
(in
Reportable Billion-Dollar billions)
GBU Segment Key Products Brands

(1) Partially offset by net sales in corporate to eliminate the sales of unconsolidated entities included in business unit results.

Head & Shoulders,

Cosmetics, Deodorants, Hair Care, Personal Olay, Pantene,
BEAUTY Beauty Cleansing, Prestige Fragrances, Skin Care Wella $26.3

Blades and Razors, Electric Hair Removal

Devices, Face and Shave Products, Home Braun, Fusion,
Grooming Appliances Gillette, Mach3

HEALTH
AND
WELL- Feminine Care, Oral Care, Personal Health Actonel, Always,
BEING Health Care Care, Pharmaceuticals Crest, Oral-B $16.7

Snacks and Pet

Care Pet Food, Snacks Iams, Pringles

HOUSEHOL Fabric Care Air Care, Batteries, Dish Care, Fabric Care, Ariel, Dawn, Downy,
D CARE and Home Care Surface Care Duracell, Gain, Tide $37.3

Baby Care and Baby Wipes, Bath Tissue, Diapers, Facial Bounty, Charmin,
Family Care Tissue, Paper Towels Pampers

2009 NET SALES

Financial Highlights

FINANCIAL SUMMARY (UNAUDITED)

Amounts in millions, except per share amounts 2009 2008 2007 2006

Net Sales $79,029 $81,748 $74,832 $66,724 $5

Amounts in millions, except per share amounts 2009 2008 2007 2006

Operating Income 16,123 16,637 15,003 12,916 1

Net Earnings 13,436 12,075 10,340 8,684

Net Earnings Margin from Continuing Operations 14.3% 14.4% 13.4% 12.7% 1

Diluted Net Earnings per Common Share from Continuing Operations $ 3.58 $ 3.56 $ 2.96 $ 2.58 $

Diluted Net Earnings per Common Share 4.26 3.64 3.04 2.64

Dividends per Common Share 1.64 1.45 1.28 1.15

NET SALES
Net Sales (in billions of dollars)

05 $55.3

06 $66.7

07 $74.8

08 $81.7

09 $79

2009 Segment Information[19][25]

Sales
Net % Net % Total
Growth Billion-Dollar
Sales Total Earnings Earning
from Brand(s)
($M) Sales ($M) s
2008

Head &
Beauty 18,789 23.6% $2,531 22% -3.72% Shoulders, Olay,
Pantene, Wella

Gillette, MACH3,
Grooming 7,543 9.5% $1,492 13% -8.61%
Braun, Fusion

Actonel, Always,
Health Care 13,623 17.1% $2,435 22% -6.55%
Crest, Oral-B

Snacks,
Coffee, and 3,114 3.9% $234 2% -35.82% Iams, Pringles
Pet Care
 Ariel, Dawn,
Fabric and
23,186 29.1% $3,032 27% -2.71% Downy, Tide,
Home Care
Duracell, Gain

Bounty,
Baby and
14,103 17.7% $1,770 16% 1.48% Charmin,
Family Care
Pampers

Corporate -1,329 -1.7% ($201) -2% -6.74%

23 brands over
TOTAL 79,748 99.1% $11,293 100% -4.50%
$1B

Failures
While the primary responsibility of boards is to ensure that the corporation's management is
performing its job correctly, actually achieving this in practice can be difficult. In a number of
"corporate scandals" of the 1990s, one notable feature revealed in subsequent investigations is that
boards were not aware of the activities of the managers that they hired, and the true financial state of
the corporation. A number of factors may be involved in this tendency:

 Most boards largely rely on management to report information to them, thus allowing
management to place the desired 'spin' on information, or even conceal or lie about the true state
of a company.

 Boards of directors are part-time bodies, whose members meet only occasionally and may not
know each other particularly well. This unfamiliarity can make it difficult for board members to
question management.

 CEOs tend to be rather forceful personalities. In some cases, CEOs are accused of exercising too
much influence over the company's board.

 Directors may not have the time or the skills required to understand the details of corporate
business, allowing management to obscure problems.

 The same directors who appointed the present CEO oversee his or her performance. This makes
it difficult for some directors to dispassionately evaluate the CEO's performance.

 Directors often feel that a judgment of a manager, particularly one who has performed well in the
past, should be respected. This can be quite legitimate, but poses problems if the manager's
judgment is indeed flawed.

 All of the above may contribute to a culture of "not rocking the boat" at board meetings.
Because of this, the role of boards in corporate governance, and how to improve their oversight
capability, has been examined carefully in recent years, and new legislation in a number of
jurisdictions, and an increased focus on the topic by boards themselves, has seen changes
implemented to try and improve their performance.

The future
Historically, directors' duties have been owed almost exclusively to the company and its members,
and the board was expected to exercise its powers for the financial benefit of the company. However,
more recently there have been attempts to "soften" the position, and provide for more scope for
directors to act as good corporate citizens. For example, in the United Kingdom, the Companies Act
2006 requires directors of companies "to promote the success of the company for the benefit of its
members as a whole", but sets out six factors to which a director must have regards in fulfilling the
duty to promote success. These are:

 the likely consequences of any decision in the long term

 the interests of the company’s employees

 the need to foster the company’s business relationships with suppliers, customers and others

 the impact of the company’s operations on the community and the environment

 the desirability of the company maintaining a reputation for high standards of business conduct,
and

 the need to act fairly as between members of a company

This represents a considerable departure from the traditional notion that directors' duties are owed
only to the company. Previously in the United Kingdom, under the Companies Act 1985, protections
for non-member stakeholders were considerably more limited (see e.g. s.309 which permitted
directors to take into account the interests of employees but which could only be enforced by the
shareholders and not by the employees themselves. The changes have therefore been the subject of
some criticism.[3