Corporate governance
Summary of article
There has been a shift in corporations from the objective of maximizing profit to the need to ensure value maximization which can be achieved by proper structure in place. The aspects that encourage high value attainment include aspects such as transparency, fair treatment of stakeholders, effective policies and implementation of proper operational standards in any organization.
Failure of some big organizations in the recent past has been due to poor management and governance of corporate organizations.
The definition of corporate governance according to London’s Stock Exchange Cadburry committee of 1992, is the system by which the companies are directed and controlled (Reema, & Fulbag, 2009).
Principles of corporate governance emphasize on the need of proper exposure of the corporation to the relevant stakeholders in order to improve transparency. The fundamental principle of equitable treatment must not be violated. This is to ensure that market participants and investors relationship is not damaged but made closer with the company (OECD principles of corporate governance, 2004)
The perception of the community towards the company is important; therefore disclosure of the organizations policies and principle of operation to the public would boost the organizations image and improve governance. Shareholders should be made aware of any major decisions made as well as receive fair treatment at all times. Good working relationships between stakeholders is bound to improve efficiency and governance in the company (OECD principles of corporate governance, 2004).
Discussion
There are a number of pillars that would likely improve governance in any organization. One is to respect the rights of the shareholders and allow them access to their functions. Each shareholder has a right to access to information regarding to the company. Therefore, this information should be made available to the shareholder at any time. They should also be given the right to vote and primarily influence directly the organization. Another pillar to effective corporate governance is fair and equity in treatment of the company stakeholders and shareholders. Insider trading and abusive or any improper conduct should be discouraged. In essence, though shareholders might come from different backgrounds, fair and equitable treatment should prevail. Minority shareholders should have their interest safeguarded by the governance to prevent majority abusive shareholder from taking advantage of them.
Disclosure and transparency is another pillar of good corporate governance. Matters related to financial status and spending of the company should be properly addressed and made public to the stakeholders. Other aspect that should be disclosed includes ownership of the company, remuneration policies of directors and the selection of the same, company objectives and policies. Shareholders should be made aware of their rights which include voting and their dues.
Plans made by the company whether short-term or long-term should be disclosed to the public so that faith in the organization be developed by potential investors. Board members should only make decisions based on fully acknowledge facts. Decisions made should be in good faith and reflect the objectives of the company and wishes of the stakeholders and general public. Stakeholder’s interests must be taken into account by the board while making these decisions. If conflicting interests are there, then the board should treat the stakeholders fairly.
Conclusion
For continued success in any corporation, corporate governance should be transparent and effective. The way a company is perceived by the public and potential investors will determine its success. Successful companies are transparently and fairly run.
Reference
OECD principles of corporate governance, (2004). OECD publication service. France
Reema, S. & Fulbag, S. (2009). ‘Voluntary Corporate Governance Disclosure: A Study of Selected Companies in India.’ The IUP Journal of Corporate Governance. IUP
Robert, P.G.(2004).Leadership and governance from the inside out. New York.NY:John Wiley and Sons.
