Governance reform at Research in Motion Ltd. (RIM) Harvard Case Solution & Analysis

 Governance reform at Research in Motion Ltd. (RIM) Case Solution

Problem statement:

RIM was facing leadership challenges as there was no appropriate structure of corporate governance, which resulted in improper granting of the stock option as well as it affected the operations of the company along with the increase in the competition and market challenges.

RIM’s board and its structure in 2007:

The company faced significant challenges with respect to the structure of the board and improper granting of the stock based compensation. Due to the improper compensation related to stock options, the institutional investors put pressure on the board and management to restructure and emphasized that it should be according to the best practice of the corporate governance principles.

Moreover, the current compensation scheme was not according to the GAAP procedures as stock based compensation was not disclosed in the financials of the company, which also created serious concerns among the institutional investors with respect to the leadership structure of the company.

In order to respond to the leadership concerns of the institutional investors, the management of the company recommended certain changes in the structure of the board of RIM such as separating the roles of the chairman and the CEO, and appointment the lead director as well as increasing the number of the directors. This would help resolve the concerns of the institutional investors to some extent as oversight committee was responsible to decide the compensation scheme for executives as well as the oversight committee was comprised of independent directors, which was according to the principles of the corporate governance.

In addition to this, the roles and responsibilities of the CEO and Chairman were different and separate from each other,which is considered as the best practice in industry with respect to the corporate governance principles. Moreover, the appointment of the lead director was a good move from the board of RIM while the responsibilities and scope of the lead director were limited as he was not responsible to evaluate the board and CEO. Moreover,the director was not responsible for the self-assessment of the board, which had be performed annually and on a regular basis.

Furthermore, the addition of the chief accounting officer and the admin of the stock options in the board was also a good move from the board in order to provide better sense of security to the institutional investors.

However, it was not clear that to whom the admin of the stock options would report as if he would report to the board, then it would be the matter of conflict of interest as the admin of the stock option would no longer be independent and the concerns of the institutional investors would remain the same. Whereas, the structure of the RIM also included financial expert who would be the head of the audit committee, and it would also be according to the laws of the SEC, therefore the current board structure of the RIM includes both positive and negative elements.(Duties and Responsibilities of the Lead Independent Director, 2016)

RIM the right board size or not:

At the end of the fiscal year of the 2006, the number of board members was seven among which three were executive directors and four were independent directors. The current board structure of the RIM included nine board members as the management increased two members in order to satisfy the concerns of the institutional investors as according to their stance, the structure of the board was compromising the objectives by granting improper share based payments to the executives, and this was due to the lack of the proper corporate governance structure.

 It was expected that the increase in the number of members in the board structure would makethe size of the board more appropriate as compared to the past practices, however this structure was for the fiscal year 2011 as there were only 7 to 8 effective directors during the period of 2008 to 2010.....................

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