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The board selects officers and the officers are responsible to execute the policies of the board.
The officers of the subsidiary do not “report” to the officers or board of the parent nor are they responsible to the officers or board of the parent corporation.
The matter of subsidiary independence is oftentimes a stumbling block to the parent business enterprise which may view an independent subsidiary as an uncontrolled subsidiary.
But recognizing a subsidiary as an “independent” corporation is not the equivalent of regarding the subsidiary as “uncontrolled.” At all times, provided that appropriate bylaw provisions are adopted and maintained, the parent has the legal authority to hold the subsidiary accountable to meet “bottom line” financial objectives, to pursue acceptable policy mandates, to fulfill its goals and to otherwise conduct its affairs in a manner pleasing to the parent.
This does not mean, however, that there is no communication between the subsidiary’s CEO and the parent.
Thus, not only should the subsidiary’s directors be selected with care, they should be “schooled” in a formal board training program which teaches individuals what they should know about being a director of a corporation.Not everyone is suited for being a director of a corporation.Today, a business corporation can often present challenges which tax the ability of the most gifted board members.This is a most important aspect of the parent’s control of its subsidiary.By selecting qualified, and to some extent indoctrinated, directors, the parent puts into place the subsidiary’s board of directors.