The paper "International Corporate Governance" Is a great example of a Business Case Study. Corporate governance has become an important part of a business plan. Initially, companies did not take corporate governance with the seriousness it deserves until the 2000s following the corporate scandals that brought many big companies to their knees. In particular, the fall of former giant firms, such as Enron, WorldCom, and Adelphia, which also rendered its employees and shareholders bankrupt has demonstrated the importance of corporate governance. The aim of corporate governance is to promote accountability in a firm as well as prevent the occurrence of disasters that might prove costly to an organization.
This document will explain the concept of corporate governance and proceed to highlight the features of Qantas Airway’ s corporate governance framework. The discussion will also delve into how Australia’ s corporate governance system impacts Qantas Airways. The Corporate Governance Framework Mallin (2012, p. 6) argues that management and governance go hand in hand. As such, the two must be balanced to ensure the effective operation of a company. Although corporate governance has for many years been ignored by companies, the concept is gaining immense recognition in the present-day businesses.
This follows the lessons learned in the 2000s after the collapse of many big companies due to poor management and corporate scandals. The concept of corporate governance, however, is defined differently by different organizations and scholars. Traditionally, corporate governance was taken to mean the way firms are managed and directed. However, in recent times, the concept of corporate governance is used to mean a framework of rules; guidelines that companies are expected to follow in making decisions, and how managers are held accountable for them (Mallin 2012, p.
5). In other words, corporate governance is the rules and procedures that guide the conduct of executives of a company in their management process to ensure accountability and protection of stakeholders’ interests. Accordingly, the corporate governance framework defines the relationship between a firm and its stakeholders, including customers, investors, suppliers, employees, government, and the community. Agency Approach to Corporate Governance Agency theory has a role in the corporate governance of a company. The Agency theory explains the relationship between the principal and agent.
According to the agency theory, the agent must represent the principal’ s best interest by doing that which is required by the principal instead of pursuing self-interest (Kaler 2002, p. 13). The failure by the agent to represent the interest of the principle by pursuing self-interest usually results in conflict between the principal and agent. Accordingly, because executives act as agents of shareholders in a company, they are expected to serve the best interest of shareholders by striving to maximize value through effective management. Therefore, to avoid a conflict from arising in a company between the agents and the principals, a company should consider creating a corporate policy.
Additionally, corporate governance can be utilized to change the rules used by the agent to ensure that the interest of the principal is restored. From Stakeholder Approach Stakeholders play a key role in the success of a company. Some of the key stakeholders of a company include shareholders, customers, suppliers, employees, government, and the community. These stakeholders have diverse interests in a company. Therefore, to ensure success, a company should strive to ensure that the interest of these stakeholders is protected through corporate governance.
Shareholders usually form a critical shareholder of a company since they invest their money in a company and expect a good return on their investment (Solomon 2007, p. 56). Therefore, shareholders expect executives to adopt good corporate governance to ensure that the company is properly managed to ensure high profitability so that they can get good returns from their investments. Most companies also have the tendency of ignoring small shareholders in crucial decision making by only serving the interest of majority shareholders.
However, good corporate governance seeks to ensure that the interest of all shareholders are served without discrimination by ensuring that even the small shareholders are given a chance to air their views during general meetings (Kaler 2002, p. 26). Additionally, according to the corporate governance principle, a company should ensure that the interest of stakeholders is recognized and satisfied. For instance, it has been shown that addressing the interest of non-shareholder stakeholders such as employees, customers, and suppliers can create a positive relationship between a company and the community, as well as the press.
To protect and satisfy the interests of stakeholders, a company must ensure that there is transparency in business practices, and financial records, as well as ensure that the executives pursue the objectives for which they are hired.
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