The Financial Function and Corporate Governance

This chapter examines the essential role of the &s;financial function&s; under Henri Fayol&s;s management as well as his relationship with different corporate stakeholders, including the board of directors and shareholders. Capital is required for personnel, plant, tools, raw materials, dividends, development, and reserves. Shrewd financial management is necessary to obtain capital, to make optimum use of available funds, to avoid foolhardy commitments. In 1888 the members of the board of directors were also the company&s;s main shareholders. The board of directors supervised the managing director&s;s actions and most often approved his decisions. Henri Fayol was appointed as managing director by default in 1888 and progressively gained the trust of the board of directors. Each month the board of directors was informed of the company&s;s finances and it always discussed the year&s;s dividend, investment of liquid assets, funding of reserves, investment levels for each site as well as loans and capital increases.