Corporate Governance and the Board Essay
I consider this since it shows the significant of the relationship among all the parties concerned in the company. It brings about a broad picture that corporate governance ought to be fluid and dynamic but not just follow rigid models. My take is that corporate governance is important for organization that wants to maximize on accountability and effectiveness. The definition further presents different sides of corporate governance than the conventional one. With that, stakeholders are now becoming a central concern hence the web of relationship becomes enormous especially in big organizations. This is founded on the belief that companies are able to utilize reforms measures with regard to concepts such as openness, transparency and forgiveness. He illustrates that such reforms might not lead to desired results when actually transparency can diminish accountability.
From my study I found that when an organization is held responsible by all its stakeholders as well as shareholders, they are capable of coping with changes without which issues about disparity keep arising. The increase has led to redirection of attention issues of corporate governance such as trust, accountability and ethics. Though the main objectives of organizations is to maximize on its value, they should not just be contributors to the economy but also promote transparency, fairness and always be accountable to it stakeholders. Contrary, Stakeholder theory is more about ethical issue, legitimacy and fairness. It further stipulates that the company should be more concern about the communities’ interest than solely on making profit. Conventionally, it has been criticized that organizations do not the ability act responsible to the society in ways that not related to their business activities.
Further it is criticized to involve long decision making process and lacks flexibility. On the other hand, Stakeholder theory can be modified by companied by having some members of the community being board members and brings forth share focus on stakeholders need and making profit. Nonetheless, there are doubtful effects to presume that women as board members will persuade the organization to partake in societal business practice. My review is based on Byron and Post’s (2016) research on corporate governance and gender issue, where did not just focus on the need to have a diverse board but also identify women influence in social business participation. Economist view boards just as monitors of firms and thus suggest that someone should be hired as a manager to the firm.
However, there lies some relationship between board composition and company performance which accounts for resource dependence and agency view. Basically, boards play a vital task more than put by the economist. With that, board diversity will lead to increase in diversity of mind and quality of decision making and promotion of equity and equality especially for underrepresented group. Board gender diversity improves overall Corporate Social Responsibility strength and reduces it weakness since diverse board perform better than the less diverse board that essentially succeed in stable environment. Board diversity demonstrates the organization’s desire to CSR that leads the company into having more directors across who are usually outsiders. From Byron and Post’s (2016) paper, they pointed a drawback of lack of enough understanding on the likelihood of social responsible organization hiring female and the possibility of them taking part in such companies.
Early studies show that organization did not hire women to such position since they presumed that they would put their family first while neglecting their jobs. Tesco Corporate Governance Issues In 2014, TSCO Company which is food retail has over-stated its half year profits, these raised questions about its Board of director’s composition as well as the use of unsuitable accounting policies. It came to the light that before appointment of two non-executive board members on 7th October 2014, TESCO did not have a board member with retail experience. Such inadequacy in knowledge illustrates that the board lack expertise to effectively question the company’s executives. As external auditors discussed the risk involved in such manipulation in the recognition of commercial income, it did not prevent the firm’s first-half figures impulsively anticipating cost savings.
The misinterpretation was only found when one of the firm’s employees questioned the accounting treatment. The board should ensure that it is well informed so as to make sound decisions that are not biased. Additionally, the board should ensure that all stakeholders interest are put at and to ensure transparence and tranquility in the companies endeavors. The board is responsible for ensuring fairness, independence and accountability; these features will see to it that there is effective corporate governance in the organization. Bibliography Byron, K. and Post, C. L. Investor reactions to company disclosure of high CEO pay and high CEO-to-employee pay ratio: An experimental investigation. Journal of Management Accounting Research, 28(1), pp. Roberts, J. No one is perfect: The limits of transparency and an ethic for ‘intelligent’accountability.
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