Achieving Corporate Excellence Through Good Corporate Governance Practices

Corporate governance in itself has no single definition but common principles which it should follow. For example in 1994 the most agreed term for corporate governance was “the process of supervision and control intended to ensure that the company’s management acts in accordance with the interest of shareholders” (Parkinson, 1994)1. Corporate governance code is not a direct set of rules but a self-regulated framework which businesses choose to follow. This code has continued to change in the past 20 years in accordance with what is happening in the business world. For example the Enron scandal caused reform in corporate governance with the Higgs Report which corrected the issues which were necessary. Although it does not quickly fix problems, it gives a better framework to

Recent high-profile corporate failures, scandals and, in some cases, executive corruption, have focused international regulatory and public attention on the need for having appropriate corporate governance standards and practices. (Leblanc 2005) As such, much emphasis is being placed on board evaluation.

Phenomenal growth of interest in corporate governance has emerged in recent years. The body of literature on the subject has grown markedly in response to successive waves of large corporate failures. Furthermore, there have been numerous attempts to define what constitutes ‘good corporate governance’ and to provide guidelines in order to enhance the quality of corporate governance.

The article is written to help readers gain a solid understanding the roles of corporate governance, both inside and outside the company. Its goal is simply to impart information, not make claims or arguments on its own. I will be judging it mainly on the sources gathered, numerous examples and explanations given and the overall effectiveness it possesses in effectively communicating its ideas.

This was a very interesting article, in my opinion it brings to mind the derived phrase, which came first the chicken or the egg. Meaning, is corporate governance an attempt to control the results of unethical practices of corporations or is it meant to deter them. In reading this article, it is clear that certain corporations practiced unethical business behaviors for self-interest, but the questions this author have are: 1. Should corporate governance be regulated by the legislature as well as the organization and to what degree, 2. Is corporate governance, there to protect the shareholder or the stakeholder, 3. How effective is corporate governance on a global level. The need for a governance system is based on the assumption that the separation between the owners of a company and its management provides self-interest executives the opportunity to take actions that benefit themselves, with the cost of these actions borne by the owners (Larcker & Tayan, 2008).

Corporate governance is the set of processes, customs, policies, laws and institutions, which directed, administered and controlled over the corporation (Monks & Minow, 2008). Corporate governance is a way by which a company governs itself for providing the values to their stake holders. The WorldCom did not follow the corporate governance policy. If the WorldCom would have followed the corporate governance it would have not led towards this business failure and company would have not gone for the unethical practices conduct in the organization. Corporate governance would have increased the faith of stakeholders towards the company and company would have survived for long time (Monks & Minow, 2008).

Questions of ethics, or the right way to run a are inherent in all aspects of corporate governance and in every board decision and action. Ethical choices are relevant within the core business strategies that boards pursue and the way that direct the business as a whole to achieve them. The present paper provides a brief account of Indian corporate governance, corporate governance Codes, guidelines, Business Ethics, benefits of Business Ethics. This article also analyses the relationship between corporate governance and business ethics.

The concept of Governance is simple the system designed to control and distribute power within an organization. According to Hoel (2011), good corporate governance involves having a good leadership structure and the complex system of incentives, checks and balances that makes sure that the organization creates long-term

ASIC determines whether the company has complied with corporate governance and consumer protection strategies to run the business. Shareholders need accurate, relevant and timely information to analyze the future prospects of the company and to determine whether the enterprise is generating sufficient return as compare to the industry. Managers in return may manipulate the profits to retain shareholder’s confidence but ASIC strongly condemn this act and require management to comply with corporate governance strategies to maintain and enhance shareholder’s confidence (Gugler, Klaus, 2001)

In Chapter One of Boardroom Excellence: A Commonsense Perspective on Corporate Governance (2004) Paul Brountas provides a persuasive explanation regarding how Corporate America's focus on unrealistic quarterly growth sent the message to do “whatever it takes” to employees and managers with little regard for honest accounting (The Great Bubble & Making the Numbers). Furthermore he asserts that “the symbiotic relationship” between self-serving executives and inept irresponsible corporate boards fed the growing corruption (Ch. 1, Contributing Factors).

In the light of various corporate scandals, regulatory bodies and corporate governance were placed under pressure by shareholders and stakeholders to form a tighter grip in governing corporation’s conduct. The obligations, roles and responsibilities of company’s stewards are under scrutiny of Corporations Act, listing rules, country’s code of corporate governance, ethics as well as social standards.

Companies should be controlled and directed in accordance with a system of good corporate governance and ethical business principles. It is through creating this corporate governance framework that a company can ensure effective business practices and corporate success.

Q2. What were the changes made in the corporate governance and the Indian Companies’ Act after the Satyam Scandal occurred?

The new concept of having an Independent Director is a welcoming step for corporate governance in India. The changes have been made so as take a step in the right direction. An Independent Director is expected to enhance corporate governance and ensure the management and affairs of the companies are conducted in the interest of stakeholders. It is expected that these changes will thwart corporate scandals in future and insulate shareholders interest.

It is well established that good corporate governance practice is beneficial for firms, its stakeholders and whole economy. Further based on studies such as by Levine (2004), saving rates, investment decisions, technological progress and consequently economic growth are encouraged as financial systems reduce market frictions. So developing countries require reforms to stimulate financial system for revival of economy.