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Arunavo answered on
Dec 10 2021
Running Head: BUSINESS ETHICS 1
BUSINESS ETHICS 2
BUSINESS ETHICS
Table of Contents
Introduction 3
Theories of Corporate Governance adding to Organizational Effectiveness 3
Stakeholder Theory 3
Resource Dependency Theory 4
Agency Theory 5
Importance of Stewardship Theory to Efficient Governance in For-Profit and Non-Profit Organizations 6
Role of Leadership Beliefs and Values in Corporate Governance 8
Conclusion 10
References 12
Introduction
Corporate governance is an important duty that every company needs to follow and it is a mandatory part of their organizations. In the cu
ent business scenario, the companies have reached globally and they have touched as well as served different places, the people living, along with developing them economically or sustaining their culture. Corporate governance is designed by the management of an organization and ca
ied as per with the joint decision from the Board of Directors to the shareholders of the company (Agrawal & Cooper, 2017). The main purpose of the corporate governance is for the smooth functioning of the organization. When a company operates, the first target is to generate revenue and profit.
While accomplishing the desired result, the responsibility of the company is to look after the employees of their organization, remunerate them properly, create a positive environment in the organization for smooth operation, fulfill the duties towards the society, where the company is operating, by developing the economic scenario by employing the locals and do some societally beneficial works. Therefore, the present assignment holds prime importance in order to understand relevant theories that support effective corporate governance and thus, aid the leadership of both non-profit and for-profit organizations.
Theories of Corporate Governance adding to Organizational Effectiveness
The management experts have formulated certain theories that define the application of corporate governance in an organization.
Stakeholder Theory
In the present theory, the corporate governance is stated regarding the issues concerning the stakeholders. The stakeholders are the people who supplies products and raw materials to the company, the buyers who purchase products, and the governmental officials who decide and formulate the policies. As mentioned by Abdullah, Ismail & Nachum (2016), the theory is
idging the gap between the shareholders and the company. The stakeholders are divided into two groups, the primary stakeholders and they include the shareholders or investors, the customers of the company, the suppliers of the company and the employees of the company.
Moreover, the secondary stakeholders are those who are government officials, the trade association people involved with the company, the political party of the locality where they are operating and the people of the place where the company is working. The theory also defines that the manager of the company and the management should look after that their work and activities should not be anyhow affected in a negative way. The company should focus on their social contribution.
As per the government policy, the company should look after the wellbeing of the place of its operation. As per the government norms, a company should contribute towards the society where it is operating, as it is their ethical responsibility (Srivastav & Hagendorff, 2016). Therefore, the managers have to look after the
oader aspect of the implementation of the theory and look after its successful deliverance.
Resource Dependency Theory
With the name of the theory, this is clear that the following part discuss about the resource allocation of the company. The company’s resources for operation come from the approval of the directors of the company. The resources that are allocated are used for the company’s operation that includes the production, salary of the employees, purchasing raw materials and many more areas of expenditure. However, as argued by Aguilera and Crespi-Cladera (2016), the management will look after the profit that the company has earned based on the amount that it has invested for the firms operation.
The top-level management people who formulate the strategic framework are responsible to formulate the areas where the resources should be invested. Their primary aim is to generate the economic outcome from the resources allocated. As with the change in environmental functioning of the market, the company also gets affected. Mostly if any company is operating in any new place then sometimes it becomes a bit difficult for management to allocate the resources of the company properly. Without the proper allocation, there are possibilities that the company may incur loss (Qian & Yeung, 2015). Therefore on some occasions the company hires some experts in the field of economics who are from the local place, helps the company to formulate the allocation of resources.
As they know the market condition and they are also aware about the costing and the future trend of that place so they can guide the management of that company to plan fully allocate the resources need for purchasing raw materials, a
angement of transportation, salaries of the people and other necessary requirements. Therefore the company can able to generate the profit by proper allocation of the funds and therefore the proper operation of the organization takes place. Therefore, this is the detailed explanation of the importance of resource dependency theory of corporate governance (Levit & Malenko, 2016).
Agency Theory
Corporate governance theory is formulated by the board of directors with the discussion of the stakeholders for smooth functioning of the organization without compromising on the profitability of the company. The managers who as per the definition of the corporate governance are known as agents are the one who looks after the proper implementation of the following....