You Make the Call-Situation 3

question 8

Essay

You Make the Call-Situation 3
For years, a small distributor of welding materials had followed the practice of most small firms, treating the board of directors as merely a legal necessity. Composed of two co-owners and a retired steel company executive, the board was not a working board. But the company, run informally with traditional management methods, was profitable.
After attending a seminar, the majority owner decided that a board might be useful for more than legal or cosmetic purposes. Thus, he invited two outsiders-both division heads of larger corporations-to join the board. This brought the membership of the board to five. The majority owner believed the new members would be helpful in opening up the business to new ideas.

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Definitions:

Net Income

The company's net income, calculated by subtracting all costs and taxes from its total earnings.

Original Capital Investment

The initial sum of money invested in a business venture, project, or asset, used to start or acquire the investment.

Salary Allowances

Additional benefits or compensations provided to employees on top of their regular salary, which may include housing, transport, or medical allowances.

Liquidation

The process of closing a business and distributing its assets to claimants, often done when a company is insolvent.