Culture and Corporate Governance - Essay Example

Name Course Tutor Date Corporate Governance Introduction Corporate governance is a group of customs, laws, policies, and institutions guiding the management or administration of a corporation or company. It can also be defined as the bond between the stakeholders of an organization and the objectives they aim to achieve as a group. Corporate governance is necessary as it ensures the accountability of the personnel in an organization by use of mechanisms that try to lessen the principal-agent problem. A good corporate governance is a tool for social economic development that is it offers a good relationship between the shareholders and ensures that the economic status of every member is strengthened. There are many other definitions of corporate governance based on the field of specialization; those in other fields like sociology, psychology, or law look at it from their own perspectives. A corporate governance represents a corporation and can sign in its name, thus it should be well structured with the executives who are good role model and having perfect characters which enables them achieve the goals of the corporation. These executives have the roles of organizing the others and guiding in the meeting proceedings. Thus they should be wise with good leadership qualities. The board structures and characteristics that contribute to effective corporate governance The board of directors is the main body of which governs a corporation, however its structure and distinctiveness has much impacts on the performance of the firm. As the owner of the corporation one should be careful when selecting the board of directors; this will decide whether you succeed or not. The board should be well structured with the members from different backgrounds so as to have divergent point of views when it comes to the issue problem solving or decision making (MacLeod 22). There are many characteristics that should be put in place when choosing the board members. The board should include wealth people as it is said birds of the same feathers flock together so it is to human beings; people of the same social class spends time together. This will be to the advantage of the corporation if need arise it will easily get support from the shareholders. The board members should have a good relationship with the society or have a rapport with the world. The board members should have passion to work. They should love and enjoy their work so as to easily achieve their objectives. It is important to have a can do attitude which will encourage them to work more hard and develop a positive attitude towards their work even as they face challenges they can easily find a way to overcome them. For it to be possible and easy to determine board members with these characters the owner should first have them (Crowther 23). The characters will help the governors offer an effective leadership as they will be great role models to the people working with them and built a good rapport hence a favorable working environment. Voluntary codes are a set of none legislatively commitments which are agreed upon by one person or a group or corporations. They may also be set to influence, shape, manage, or standardize behavior. Corporate issues can be dealt with through the use of the voluntary codes as they provide mechanisms to deal with the disputes. Although the codes are voluntary there many reasons for firm to adhere to their provisions because they are initiated in reply to customer or competitive pressure or perceived threat of new regulation or trade sanctions (MacLeod 14). The acceleration of German corporate governance development coincided with the increasing complication of governance issues. This led to challenges for companies in implementation of quality governance principles. This called for the introduction of a voluntary code and other tools to achieve the implementation of good governance. A code of best practice was the first step taken as a model for governance catalogue. In 1999, a group of experts from the concerned companies started working on the implementation of the code. This was well embraced by the managements and its influence in the corporation governance was felt as most of the personnel were able to conduct themselves well without anybody’s supervision. To facilitate a wider understanding by applying good governance in the financial market, some scholars from German Society of Financial Analysts developed a scorecard for German Corporate Governance under the code of best practice and presented it on June 2000. Other nations like Russia and some Asian states admired its effects and tried to copy Germany. In July 2000, the German Chancellor convened Government Commission on Corporate Governance to develop formal standards for German governance and draft recommendations for companies which would develop in future. A voluntary code is meant to portray a clear picture of the governance essentials and hence comprises of three issues: an explanation of the legal requirements relating to the major governance points, Shall recommendations which shows the basic international governance values and lastly Should Suggestions representing extra international factors of good governance (MacLeod 43). The code demands for an explanation incase a company fails to comply with these recommendations although the code is voluntary but once a company engages with it it has to comply with the recommendations. The corporate governance should involve these voluntary codes so as to ease their work since nobody will go against the recommendations of the codes and they end up being so responsible. That is they can do things on their own without being supervised by anybody. A shareholder is a legal owner of one or more shares of stock in a joint stock company hence shareholders starts being associated with the company after signing a memorandum of association. As the owners of the companies they opt to be given the priority they deserve and have a good rapport with the board of the companies (Field 87). In UK the integrated companies in the lists of the Stock Exchange are subject to the combined code on the governance and the Financial Reporting Council is the independent UK regulator responsible for the combined code. This code was also known as comply or explain meaning that if the companies choose not to comply with the specified provisions then it had to explain to the public on their decision. The UK corporate governance mostly works to improve the relationship between the shareholders and the boards governing the organizations. As the joint management of the company, both the shareholders and the board members should have a close engagement so as top communally achieve the goals and objectives of their company. The board as a group represents and signs for the company hence they feel much superior even more than the legal owners of the firm. They choose a leader among themselves and dictate to on the decisions to take concerning the company (Rashid & Islam 76). In some companies the board is so much dictated by the shareholders that it always act to honour the interests of them but still ensures that all the shareholders are treated equally especially those that have small voice such that no benefit is conferred to a certain shareholder to the loss of another. In most of the companies the shareholders can only raise their views during the meetings, all the other time the board decides on what to do with the company. This is quiet unfair to them as they always have the right to make decisions in their own premises. (Cory 43) The shareholders just like any other common man outside there cannot tell the performance of the company until the publications bearing the annual accounts are released to the market. I think as the owners of the company, they should be involved during the evaluation of the annual performance of the firm. Regarding the rules indicating that the shareholders have the right to request for information, the board does not disclose any information concerning the company unless the accounts it does to the public (Langford& Retik 21). Decision making calls for the contributions of many people. Some of the shareholders may be talented in making decisions over the challenging issues than most of the board members can. Given a chance in decision making these members can really contribute On the other hand if the shareholders are always granted the opportunities to make decisions they are likely to overdo it. This is because they will base their decisions on their personal interests and not those of the business or the runners. Involving the shareholders in decision making can prolong the decision making as they are many and they all expect their wishes to be honored. Conclusion All the organizations need leadership so as to achieve their goals. Not just leaders but responsible ones who will not mind spending most of their time and energy so as to ensure that the corporation is successful even if they do not benefit a lot from it. They should be good role models and very influential to the rest of the workers. When the goals are set it is the duty of the leaders to ensure that they are achieved. Apart from the leaders there are other people who very much influence the performance of the firm, for example the shareholders. These are the owners of the company who only own some stocks and entrust them with the board to work with them. The management of these corporations has many elements that enable them to work effectively, for example, the voluntary codes. These are not compulsory but help to ensure that the members of the corporations comply with their rules. The board of governors should have a good engagement with the shareholders though not allowing them to over control them especially in the decision making as they dictate roles which are too difficult for the board or irrelevant to the firm. Lastly the governors should work for the benefit of the firm and not their own. They should always relax after achieving the goals and objectives set and always remember that they will release their financial accounts at the end of the financial year. Works Cited Crowther, D. Culture and Corporate Governance. New York: SRRNet, 2008. Langford, D. A. & Retik, A. International symposium for the organization and management of construction. London: Taylor & Francis, 1996. Rashid, K. Sardar M. N. Corporate governance and firm value: econometric modeling and analysis of emerging and developed financial markets. New Jersey: Emerald Group Publishing, 2008. Jacques, Cory. Business ethics: the ethical revolution of minority shareholders. Springer, 2004. MacLeod, Sorcha. Global governance and the quest for justice: Corporate governance California: Hart, 2006. Read More