Introduction
Corporate governance can be defined as a set of laws, policies and processes impacting on the way organisations are controlled (Saheed, 2013). Therefore, corporate governance plays an integral role in establishing organisational order, by creating structures of coherent communication and distributing responsibility amongst board directors, creditors and stakeholders (Klazema, 2014). Similarly, an organisations stakeholders play an important role in influencing managerial behaviour, due to being defined as people with an interest in organisational performance and are impacted by the actions of the organisation (Daft and Benson, 2016).
This report seeks to explore the main threats that business leaders in the 21st century face
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Despite attempts to overcome the issue, government conflict persists over differences in the way business is conducted, particularly in nations including the U.S. and China, where differences remain in ideas as to how an economy should be best organised; thus emphasising the difficulties faced and the need for greater government action to resolve the issue (Chesley et al, 2016).
Additionally, global growth in capitalist systems has placed greater emphasis on governments playing the role of regulators in the globalisation process, through means of overseeing law and maintaining political control within markets (Almadani, 2014). Stemming on from this, “guarded globalisation” is a phenomenon resulting from globalisation whereby governments have undertaken an increasingly cautious approach towards foreign investment (Bremmer, 2014). The role of the Chinese government in the case of Pfizer is an example to fall under this, due to the exertion of laws that were put in place, restricting access to the market which was occupied by domestic competitors possessing government support (Bremmer, 2014). As a result, governments appear to be playing a more central role in protecting national interests when participating in global business.
Ethics and CSR
Survey findings saw that the greatest ethical challenges for businesses to have involvement in are regarding environmental protection (Council on Business and
According to the Organization for Economic Cooperation and Development (OECD), corporate stakeholders have a very important role, not only within the business for the community as well. "Good corporate governance helps...to ensure that corporations take into account the interests of a wide range of constituencies, as well as the communities within which they operate, and that their boards are accountable to the company and the shareholders. This, in turn, helps to assure that corporations operate for the benefit of society as a whole" (1999).
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).
A country’s regimes are imposed to protect the country’s interest, but these protections will create unavoidable conflict-of-interest where businesses are conducted. Likewise, the super power China and the United States, the perpetual political changes create a direct implication to the day-to-day business activities and the type business investment plan to enter the country. Hence, conflict-of-interests are commonly tensions between the different in political ideologies, social issues, historical and culture background. As these interests are the catalysts to the type of regimes that the country will impose; moreover, these regimes will favour the different types of industries.
The relationship among the many stakeholders and the way an organization is directed and governed is therefore created. Stakeholders might include customers, employees, creditors, suppliers and distributors, the community and the owners at large. The principle stakeholders are the board of directors, managements and employees. The first model of government and non-profit implementation often involves three groups: - executive board, supervisory board, and advisory board whose are appointed by shareholders to run the organization except the last group are bought in as independent experts to assist the company. Hence, what are good practices of corporate governance? How to ensure the directors act in the interests of the public?
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
Presently, corporate governance is an evolving concept as such there is no fixed definition. However, corporate governance has been defined as, “the system by which companies are directed and controlled.” (The Report of the Cadbury Committee on The Financial Aspects of Corporate Governance: The Code of Best Practice 1993)
The level of internationalisation around the globe has grown throughout the years, with advanced technologies the ease and ability to work with foreign countries has also grown. However, firms do not simply interact with each other with no outside party involvement; the government can be seen to play a large role in conducting international business. Governments continuously have the responsibility to act in the manner that they believe is best for their nation; this includes decisions regarding protectionism, which may serve to aid domestic industries but simultaneously hinder international business. It can be seen that governments do not always act in their nation’s best interest and are corrupt which can serve to increase the risks and costs of entering an international business environment. While these are examples in which the government makes international business difficult it can also be seen that the presence of a government is instrumental in creating international business effectiveness, whether this be through their legal system or from trade agreements. This makes the role the government plays paradoxical; as their involvement generally increases the risks and costs of firms seeking to internationalise, whilst simultaneously playing a significant role in creating international business effectiveness.
This separation of the owners and managers of the business is the central reason for the existence of what is now referred to as corporate governance. As discussed by Smith (Smith, 1776), Berle (Berle, 1932) and Tricker (Tricker, 2012), this created several differing schools of thought. Concepts now referred to as agency, stewardship, resource dependence and enlightened stakeholder theories combined with ideas such as managerial and class hegemony and evolving social stakeholder philosophies will form the basis of our review into the abilities of boards to act in a self-regulating manner. This paper will explore each of these in an attempt to discern if a pattern either has or is likely to emerge that enables boards to form a self-regulating social system.
The OECD Principles of Corporate Governance states that: "Corporate governance involves a set of relationships between a company’s management, its board, its shareholders and other stakeholders. Corporate governance also provides the structure through which the objectives of the company are
In other words, corporate governance is the acceptance by management of the inalienable rights of shareholders as the true owners of the corporation and of their own role as trustees on behalf of the shareholders. It deals with conducting the affairs of a company such that there is fairness to all stakeholders and that its actions benefit the greatest number of stakeholders. In this regard, the management needs to prevent asymmetry of benefits between various sections of shareholders, especially between the owner, managers and the rest of the shareholders.
Throughout the semester we have touched on a multitude of different issues in Global Business. From monetary systems and how they have changed over time, to how different regions of the world have produced diverse cultural preferences. Even after touching on as interesting topics as these, nothing has come close to the intrigue of Government and how they can affect business in many ways. The many different ways that government can intervene in a business, affect import/export numbers via taxation, and much more will be discussed in the following paragraphs. The underlying question that this paper will answer is, how do the actions of the United States and United Kingdom affect global businesses.
Evans and Richardson (2007), contend that globalized economic environment is complex and changes from time to time and this places a heavy responsibility on multinationals and other business enterprises. They are forced to adapt in order to deal with these factors for the benefit of their organizations. A company cannot ignore political issues when assessing the business environment in which it operates because it affects government policies such as licensing, regulation and taxation, which have a direct consequence on the activities of a business enterprise (Evans, & Richardson, 2007).
For example the "pajama game" discussed in global perspective is not unusual for multinational corporations. The pajama caper was a controversy arose over a US embargo forbidding US businesses to trade with Cuba. Wal-Mart was selling Cuban made pajamas in Canadian market. When Wal-Mart officials in US came to know about this, they ordered all offending Cuban pajama's as it was against US law. Canada was incensed with the obtrusion of US law on Canadian citizens. The Canadian citizen's felt that they should be able to buy Cuban-made pajama's if they wanted to. Wal-Mart was caught between a Canada-US foreign policy feud. Wal-Mart Canada was breaking US law if it continued to sell pajamas, and was subject to a million-dollar fine and possible imprisonment. However, if it did pull out pajamas from Canadian market it was subject to 1.2 million dollar fine under Canadian law. The ideal political climate for a multinational firm is stable, friendly environment. Unfortunately, that is never really the case, it's not always friendly and stable. Since foreign businesses are judged by standards as variable as there are nations, the friendliness and stability of the government in each country must be assessed as an ongoing business practice. STABILITY OF GOVERNMENT
Corporate governance is concerned with ways in which all parties interested in the well-being of the firm (the stakeholders) attempt to ensure that managers and other insiders take measures or adopt mechanisms that safeguard the interests of the stakeholders. Such measures are necessitated by the separation of ownership from management, an increasingly vital feature of the modern firm. A typical firm is characterized by numerous owners having no management function, and managers with no equity interest in the firm. Shareholders, or owners of equity, are generally large in number, and an average shareholder controls a minute proportion of the
Every business’s goal is to maximise profit, generate more revenue and increase customer satisfaction. Although to achieve these goals could be changing, barriers from the economic conditions, government and competition has increased the difficulties. Governments and businesses are interdependent, the interdependence will grow further by globalisation of the economy when it comes to international business. Mamman (2004) states: “One of the manifestations of globalisation is the blurring of political and economic boundaries and the diminishing traditional role of national governments.” The role of government has always been an important factor in business, they create rules and frameworks that let businesses compete against each other. Business is affected by the government policy, the rules and frameworks can force them to change the way how they operate. The policies of the government can have implications. For example the requirements of licensing, other permissions, regulations, taxation and formalities. All these restrictions have a direct impact on doing business.