The Importance Of A Good Corporate Governance Framework

Because corporations are established to profit and shareholders invest money with expectations of a greater return, managers cannot be given a directive to be “socially responsible” without providing specific criteria of checks and balances to which needs to adhere. Therefore, it is imperative to the success of a corporation for managers to not act solely but rather to act within the policies of the shareholders.

Corporate governance is a set of actions used to handle the relationship between stakeholders by determining and controlling the strategic direction and performance of the organization. Corporate governance major concern is making sure that the strategic decisions are effective and that it paves the way towards strategic competitiveness. (Hitt, Ireland, Hoskisson, 2017, p. 310). In today’s corporation, the primary objective of corporate governance is to align top-level manager’s and stakeholders interest. That is why corporate governance is involved when there is a conflict of interest between with the owners, managers, and members of the board of directors (Hitt, Ireland, Hoskisson, 2017, p. 310-311).

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

As details of the Enron scandal surfaced public outrage grew, calling for action, accountability and consequences. Corporate governance began receiving renewed interest. Corporate governance is a multi-faceted subject that sets forth the rules and responsibilities of the relationship between the corporation and its stakeholders (Cross & Miller, 2012). This includes the company’s officers and management team, the board of directors, and the organizations shareholders.

In general ,the stakeholder approach may be more conducive to balancing a wide variety of corporate interests and thereby discouraging impropriety.Executives and boards should take the perceptions of both shareholders and stakeholders into account when formulating strategy and enunciate their stance in all organizational communications. Only within that kind of clearly delineated context, can managers be expected to make appropriate decisions. Indeed, some of the most successful businesses are those which have embraced stakeholder values for example Bodyshop. However, we see that generally, shareholder value

The purpose of this study is learning governance and stakeholder management and should not be used as an official document for analysis

The interests of shareholders were always the primary objective of the corporations, and the management primary duty was to maximise their financial profit. According to Milton Friedman (1970), a corporate executive’s only social responsibility is to create wealth for the shareholder and to conduct the business in accordance with their desire. This perspective has been strongly challenged and modified due to the negative impact of the shareholder theory. The global scandals and crises which have been caused by the extreme interpretation of the shareholder theory have led to the rising of the stakeholder theory where the interests of the employees, the customers, and the local communities were taken into consideration and not been ignored as previously.

Over the years, Multinational enterprise have matured and developed into large companies that they are now part of our everyday lives. Form the use of mobile phones to the cars, personal computers and their software and even the beverage we drink, most of these products are supplied by Multinational companies. Their existence has great impact on our lives. In the world today, Multinational enterprises are powerful companies and they own resources in excess that most host countries possess. These companies are so powerful that they turn out to be power centers that can manipulate the host countries and even international organizations and at times the affairs in its home country.

Anyone who owns public shares in a company has invested hard-earned money into a corporation based upon their perception that the company will be profitable and sustainable. The corporation’s board of directors are then responsible to manage the company in such a way as to increase their share-holders’ investment. For hundreds of years, this attempt to increase a corporation’s worth was done with little or no interest in social responsibility. Until very recently this topic was not very much in the public eye. However, at the moment the global economy is rapidly changing and business transparency is increasing through the accessibility of information across the world. Social and global change is moving faster than ever and progressing

Multinationals have existed since the 17th century with European based companies such as British East India Company. These corporations have acknowledged as main agents of civilizations especially during the colonization era. In more recent times of globalization, these multinational organizations have been herald as being instruments for improving global relations through commercial engagements. However, what exactly are multinationals? Multinationals are business entities with presence and operations in more than one country. These operations outside their home countries is always channeled and achieved through mergers, acquisitions, and collaborations. It is estimated that multinationals globally are responsible for sales totaling $7.1 trillion and 28.3 percent of the world's GDP. To ensure that the operations of multinationals are checked and standardized, there are a number of institutions set up and these are The World Trade Organization (WTO), The World Bank (WB) and the International Monetary Fund (IMF).

There is no doubt that the shareholder and stakeholder theories are both dominant theories of corporate governance. Having already discussed the pros and cons of each theory, it is now important to analyse the debate arising to be able to determine which of the two will enable better corporate governance. First of all, it is important to highlight that this debate has emerged over the last decade and has always been a concern for most advocates of good corporate governance.

Multinational corporations occupy a prominent role in the global economy. In the beginning, they emerged as significant and enduring components in the international economy in the nineteenth century. Great Britain was considered one of the largest capital-exporting country during that century. By the year 2008, the number of these corporations was eleven times the number in operation in the early 1980s. Ultimately, the number of MNCs continue to grow within the world’s economy. The decision that these firms make are based on global strategies for corporate success. They are not focused on the conditions within any of these countries in which these firms conduct their business in. Multinational corporations work simultaneously in national political systems and global market. Multinational corporations can place multiple production facilities in multiple countries under the control of a single corporate

This essay provides an analysis of one major issues of corporate governance. Executive Remuneration had been heavily criticised, as senior executives have been receiving generous packages, despite corporate collapses and failures of company performance, which could be seen as a lack of corporate governance.

Risk management processes are, unquestionably, very thorny and delicate enterprise issues to tackle. They are crucial methods and techniques employed by firms or corporate organizations to contain the likely risks and afterward used to seize possible opportunities related to achieving their respective objectives. They are the central elements of corporate governance. According to Anantatmula and Fan (2013), these approaches or processes have changed largely in the past 25 years, particularly towards the end of the 20th century. For instance, during the 1980s and 1990s, there was a reported decisive revolution in corporate risk management. Many companies primarily employed more risk managers, which imperatively served to identify probable hazards. Moreover, the scope of risk management was limited to insurance purchases. Managers were blindly made to believe that financial management is the only way forward to ensuring that organizations registered profits. It was then referred to as “selective hedging”. The fundamental aim of such hedging was crucially directed at smoothening corporate profit and loss financial statements. However, with the main developments in enterprise risk management, contemporary studies focus on the wider perspective of governance.

Corporate governance importance arises in modern corporations due to the separation of management and ownership control in the organizations. In this task the three key elements that are thought seriously about are social responsibilty, shareholder