1500 words essay -Category - Corporate Governance

Corporate Governance Analysis
Introduction
The report presents a critical analysis of corporate governance and its practices. It judges
accountability, and transparency factors for corporate governance. Certain examples of
companies that follow corporate governance or promote unethical practices are taken into
consideration to demonstrate results of corporate governance. Report winds up with the
findings and offers conclusions.
Definition of corporate governance
Corporate governance reflects a set of association between company management, Board,
shareholders and other important stakeholders. Shareholders shape the decisions of the
company by representing their interests to the directors of company. Directors pay heed to the
needs of shareholders as shareholders are increasingly demanding company to follow the
social, environmental concerns as well as profits of them.
Corporate governance is defined with these principles. First is that company should set up
ole of management and board to conduct every day jobs. Company should promote a board
sufficient in strength and size. Company should promote accountable and moral judgement
making. Corporation must take safeguards to manage the integrity in monetary coverage.
Therefore audit committee should have self governing directors and non-executive directors.
Corporation should disclose the matters of resources candidly. Company should consider the
ights of shareholders and must make sure to practice exercises those support rights of
stakeholders. Company should identify hazard administration and acknowledgement.
Company should ensure that compensation connected with performance is transparent and
just.
With these principles to follow corporate governance, next is to consider the profits reaped by
companies. It is identified that those companies that were compliant with the principles of
corporate governance, their EPS was positively associated with corporate governance and
they earned good profits (Brown, Gorgens, 2009). Companies that were following corporate
governance principles were able to outperform in the market. Similarly sales growth is found
more for companies.
Further, it is recognised that there are numbers of factors that promote good corporate
governance. It works as a catalyst to benefit investors, companies and government because it
ationalises the needs to be in competition with other companies. Corporate governance not
only increases profits but assists the development of local economy and manages interests of
stakeholders. It aligns towards mission and vision of company. Cost of capital is determined
y corporate governance practices in international market. It promotes confidence in
economy (OECD, 2007).
Bad corporate governance examples are many. WorldCom, Enron, and Ahold and Parmalat
are some examples of bad corporate governance (Epstein & Hason, 2006).
Enron is particularly focused here to understand bad corporate governance and its result.
There are relationship between the politics, power and conflict and these are found with these
evidences. First the company had adopted a cut throat performance evaluation process. This
compelled employees to create their own groups to gain power. As the corporate governance
promotes stakeholder theory, certainly this approach is not right. Another example of bad
corporate governance is not having good bonus system in Enron. Large chunks of profits
were taken away by senior management. Less focus to train new employees was quite
evident. Transparency and openness are significant for corporate governance but company
was not able to keep its business operation transparent. There were lack of openness and
honesty in organization. Power and hierarchical structure of Enron allowed senior
management to keep important information hidden that exploited conditions of junior
officers.
Analysis reveals that employees in Enron were not making consensus but following imposed
decisions of senior management out of fear. Group thinking was prevalent and learning
orientation among employees was missing.
If we consider Colgate Palmolive company corporate government initiatives that is a
ecognised company in toothpaste market, it is identified that it has a strong ethical base for
conducting its business operation. Sustainable development of community and enforcement
of environmental practices are considered by Colgate Palmolive. Various programs company
offers to promote hygienic sanitation and hand washing. Company has focused towards
mitigation of energy and ca
on emission. These initiatives benefit society at large,
government and other stakeholders that are not directly linked with company profit. Colgate
is able...