Discussion Paper
Introduction
The idea of effective corporate governance and responsive corporate governance has gained momentum in the business environment of Australia and the United States of America after the global financial crisis. In United States of America, the scandals of Enron and WorldCom provided grounds for accessing effectiveness of corporate governance institutions in the United States of America. The paradigm of effective and responsive governance is a key determinant of the overall performance of corporates and the stakeholders as it champions the idea champion for transparency, fairness and accountability (Brink, 2011, p.49). The governments of United States of America and Australia formulated several regulations creating a conducive atmosphere for corporate governance leadership.
Responsive corporate governance may refer to the use of ethical standards when making decision incorporate affair. It lays emphasis on the rights, duties and the extent to which companies should operate in order to protect the integrity of the business. It clearly stipulates how rights, responsibilities and among different stakeholders are practised so as to achieve companies objective. The notion of responsive cooperate governance ensures that investors get access to accurate and clear information as companies are compelled to make public, and precise roles and responsibilities played by management so as to increase the level of responsibility. (Brink, 2011, p.49)
Responsive cooperate governance recognizes that organizations have legal and social obligations to employees, investors, policy makers, society and customers. It emphasizes on provision of efficient and relevant skills to the board of management so as to enable them understand proper performances of different stakeholders; this ensures proper co-ordinations of activities and human resource within the companies towards the timely achievement of its goals and objectives. Responsive cooperate governance also encourages integrity and rule of law when choosing board members, it also prescribe code of conduct that executives follow so as to arrive at ethically based decision making for the business. An effective practise of responsive governance have helped in increasing companies’ performance and reduction of poor management and unethically practises such embezzlement of funds and corruption. (Bainbridge, 2012, p.327)
Effective corporate governance, on the other hand, refers to the evolution of cooperate governments practises involved and structure of the system adopted by the business. It streamlines economic performances of a firm and measures to take so as to realize improved economic performance of other objectives. Most firms' objectives are either profit maximization or sales maximization; effective governance gives a theoretical analysis of different scenarios that have occurred in the institution so as to facilitate sound and accurate understanding of the business. (De Kluyver, 2009, p.27)
Responsive corporate governance and effective corporate governance exhibits a strong relationship as they priority to factors within or outside the business that are prioritized on so as to achieve the desired objectives, goals or mission of the institution. They also give importance to set regulations and best business practises to be practised during operations of the business. (Dine and Koutsias, 2013, p.313) They clearly outline methods of strengthening legal systems so as to protect and enforce rights of the business, as well as other stakeholders; they also closely monitor and evaluate performance of management to determine the degree to which carrying out their duties as per constitution of the organization.
Effective corporate governance also advocates for accountability, transparency and following rule of law in the day to day operations of the business; this results to maximization of objectives of the business and prosperity as stakeholders' confidence are assured. Moreover, companies' integrity and reputation it gains due to efficient operations minimize social evils such as abuse of powers by the management, discrimination of employees, improper treatment of shareholders and poor accountability. Effective governance, therefore, prevents spread of evil practises leads to loss in revenue by firms. Transparency and accountability reduce chances of business experiencing fraud dealings as it ensures better compliances to regulations of the business. Companies that follow strictly responsive corporate governance stand effective corporate governance are able to increase confidence of their investors, shareholders and customers thus dominating their counterparts that practise poor accountability. (Hirschey, John and Makhija, 2011, p.131)
Responsive corporate governance and effective corporate governance streamlines roles and responsibilities to be carried out by different stakeholders. It also advocates for proper functioning and cooperation among stakeholders so as to encourage improved performance of the entity. Effective corporate governance also advocates for proper incentives such as offering competitive salary packages to employees of the company so as to boost their productivity and efficiency. However, one major problem in corporate governance is practising ethically based decisions in the entire operation of the enterprise. Functions and responsibilities that employees, shareholders, creditors and the society are supposed to perform are outlined within the businesses’ constitution. (Monks, 2011, p.415) Success of any business relies on how best it practise idea of corporate governance such as observing rule of law and creating good working conditions among stakeholders.
Business obtains factor inputs from the society and, therefore, effective governance ensures that the business carry out their social responsibilities as required by the law. Effective and responsive governance ensures that companies carry out corporate social responsibilities so as to counter check adverse effects it poses to the environment such as pollution and land degradation as it guarantees whether the business succeeds or not. Business that has society at heart is likely to prosper at will receive full cooperation from members of the society hence boosting customer's base. (McCahery, Timmerman and Vermeulen, 2010)
Australia presents an interesting and captivating case on corporate governance as it has definite corporate code; therefore, practise of corporate in Australia is growing stronger and stronger each day. Australia's companies have adopted globally accepted corporate governance practises enabling them to increase investors and stakeholders' confidence both locally and abroad. Despite all these achievements, it still strives to uphold high standards of transparency and accountability practised in the country. United States of America strictly ensures that information creditors and banking institutions receive from business premise are transparent and accurate.
Australia exercises regulations similar to other members within the Commonwealth countries, but it borrowed a lot from United Kingdom's company law. The country currently practises corporate governance under the corporations' act of 2001. This process is administered by an independent body known as Australia Securities and Investment Commission. The commission strongly enforces legal standards and system structures of corporate governance in the country and have posted positive results in monitoring and controlling business practises.
United States of America have not developed general standards of corporate governance as it is in Australia. it is usually linked to the resistance to centralized laws and statutes of corporate governance since it is being carried out by the state; Australia shows federal system contrast those in America scenario since its set of legislation governing corporate governances performed by federal system. Rules and regulations in the United States are monitored by auditors and other regulatory authorities so as to ensure effective corporate governance in both countries. Management board in the United States are entitled to huge salary packages than their fellows in Australia, high salaries and terms of services provided has negatively impacted on growth of the companies. Moreover, the two countries have passed legislation that enforces frameworks in regulations.
Corporate system in the United States of America usually practises a single tier board of directors who are exhibit a lot of powers they carry out day to day management of the business. Corporate governance rules are, therefore, exercised to prevent them from abusing their powers. A major dominant concept in United States corporate governance legislation is known as shareholders primacy, it champions for shareholder rights in receiving fair returns from their investments. The fall in America's known companies such as Enron, WorldCom and Tyco resurfaced the issue of improved corporate governance in the United States of America.
Companies limited by shares in Australia ensure that board of directors elected must possess required expertise and skills so as to efficiently and effectively carry out their duties. The nomination committee nominates people who are eligible to be board of directors, they determine whether the director the appointment is competitive or not. In the United States, the Acts legislated outlines that any person within an organizations authority has a mandate to do so. The federal government also play management roles to ensure that corporate failures that occurred in the United States do not happen again. Professional auditors effectively monitor corporate policies in United States.
Effective corporate governance in both Australia and United States of America strictly adheres to corporate guidelines and general principles. They both focus on the structure and composition of the board of management and the limits over which they should exercise their duties. Corporate governance in both countries also encourages enforcement of moral practises in making major management decisions. Australia also advocates for integrity during day to day operations of the companies. The two countries also ensures that their citizens are subjected to fair remuneration and good terms of employment, therefore, reducing incidence of worker exploitation and harassment.
Businesses do not operate in isolation but depend on its stakeholders' smooth running of its operations. The board of management from several companies, therefore, conduct operations with a high level of knowledge so as to achieve sustainability and mutual benefits by all parties involved in operations of the business. Companies in United States of American and Australia to a larger extent have related stakeholders, and their roles and responsibilities are also quite related. These stakeholders include shareholders, employees, customers, business partners, environment, society, competitors and creditors. Success of any given company depends on how it treats it shareholders. (Tricker, 2012, p.58)
In both Australia and United States the roles and responsibilities performed by shareholders be enshrined in the Company's Article of Association. The law stipulates the right of any stakeholder to receive accurate information on his or her shareholdings within the company, the right of receiving share certificate; shareholder has a right of participating in voting exercises of the company and freedom of expressing his or her opinion during the general meeting. Shareholders contribute resources so as to facilitate operations of the business and hence are entitled to receiving fair returns once the trading period has collapsed. They are also allowed to give several suggestions on what the management should do or not do so as to achieve increased performance of the business.
Employees of any business entity are one of the most important assets in production and performance of any organization and so should be given proper treatment cautiously. Corporate governance in Australia and United States of America uses human resource so as to reach their target of either maximizing profits or maximizing sales. Their role is to combine different factors inputs into the desired output. In both countries, employees are offered chances of advancing professionally through workshops and studying leaves. It is motivating employees and also leads to developing of new skills they can use to develop innovations, also training increase the level of competence of employees. In both countries corporate governance gives priority to employees working condition that they describe as should be excellent so as to minimize risks of accidents, employees are also entitled to receiving competitive compensation depending on their duties and education background. United States of America and Australia pay concentrate on health of their employees as good health has a positive correlation to the output level.
Success of any business is positively related to the manner in which it responds to customers taste and preferences since they are the consumers of the goods or services. In both United States of America and Australia corporate governance laid great emphasis on availing goods and services of desirable quantities, quality and manageable price. Companies in both countries struggle to promote or maintain a good relationship with its customers so as to increase customers consuming its goods or services. (Mallin, 2013, p.26) The board of management avail information to customers regarding product usage, management respond to customers’ complaints so as to boost their confidence on product quality and usage.
Companies in America and Australia do not operate as independent bodies but rely on other business partners. Business partners investment their funds in operations of the business so they must be accorded accountability and transparency on the operations of the companies. The have the right and obligation of receiving products of high quality, they should also be issued with products at the right time. Ethical practise in both Australia and United States of America advocates for charging at fair prices to the business partners, but not over charging them. (John and Makhija, 2011, p.131)
Competition has over the years resulted into provision of highly quality goods and services to the consumers. Competitors in Australia and United States of America ensure that business practice fairness in pricing and offering desired quality to the consumers. Competitors’ enables companies adhere to laws as a slight deviation from the prescribed regulations leads to an adverse effect on the market share index of a corporation.
Operations of companies may lead to a negative externality to the society surrounding the companies. The two countries have formulated ways of dealing with negative effects caused by premises to the conditions that they operate. Business in both countries is encouraged to provide activities that improve the quality of living standards of the residents. They are advised to organize activities that improve the local community and the entire country at large. Management curb corruptions as it discourages economic development. (Verhoest and Lagreid, 2010)
Companies require supply of raw materials so as to engage and perform its mandate of production of goods and services. Environment, therefore, determine whether operations of the business fails or succeed. In both United States and Australia policy mechanisms are streamlined by corporate governance so as to achieve developments that pay attention to the environment. Rules and regulations are formulated so as to enable conservation of the environment by the business. The use of environment friendly products have been put in place so as to replace nuisance caused by non-decomposing, there is also the creation of knowledge towards protection of the environment.
Conclusion
Despite of government involvement in corporate governance the effectiveness of corporate governance depends on the corporates. The state should protect shareholders from incurring losses by enhancing performance of corporate enterprises so as to increase their economic performance by making sure that corporates adhere to laws and regulations. The state should also address, and foster ethical practices in corporate enterprises so as encourage effective corporate governance in the country. In addition rules governing corporates should outline roles and jurisdictions of stakeholders in corporate governance to facilitate smooth running of the enterprise so as to manage conflicts of interest.
References
Bainbridge, S. (2012). Corporate governance after the financial crisis. 1st ed. New York: Oxford University Press.
Brink, A. (2011). Corporate governance and business ethics. 1st ed. Dordrecht: Springer.
Chew, D. and Gillan, S. (2009). Global corporate governance. 1st ed. New York: Columbia University Press.
De Kluyver, C. (2009). A primer on corporate governance. 1st ed. New York, NY: Business Expert Press.
Dine, J. and Koutsias, M. (2013). The nature of corporate governance. 1st ed.. Cheltenham: Edward Elgar Publishing.
John, K. and Makhija, A. (2011). International corporate governance. 1st ed. Bingley [England]: Emerald.
Lægreid, P. and Verhoest, K. (2010). Governance of public sector organizations. 1st ed. Houndmills, Basingstoke, Hampshire, UK: Palgrave Macmillan.
Mallin, C. (2013). Corporate governance. 1st ed. Oxford: Oxford University Press.
McCahery, J., Timmerman, L. and Vermeulen, E. (2010). Private company law reform. 1st ed. The Hague: Asser Press.
Monks, R. and Minow, N. (2011). Corporate governance, fifth edition. 1st ed. Chichester, West Sussex, U.K.: John Wiley & Sons.
Tricker, R. (2012). Corporate governance. 1st ed. Oxford: Oxford University Press.
