- Internal Code :
- Subject Code : BUSM3115
- University : RMIT University
- Subject Name : Management
Ethics And Governance
Introduction to Corporate Governance Report
The following article is based on the description of the corporate governance structure within the research paper. The advantages and disadvantages of various governance structures along with management ideas have been thoroughly discussed in the following paper. Some of the major factors such as governance framework and organizational structure often matter a lot in deciding the outcomes for the business. The paper starts with an introduction about the basic requirements of corporate governance in a company or business and non-profit organizations. It is followed by the main body which describes the various models of governance within the organization. Apart from that accountability models have been used for assessing the weakness and strengths of the models. The ideas and approaches of various types of corporate-level governance have been demonstrated in brief within the article. Finally, the conclusion section describes to the readers about major advantages and drawbacks of various approaches used by the corporate governance structures to handle a business. The paper ends with some useful recommendations regarding the reformation of the agenda and also discusses the application of relevant theories that might be essential for the organizations to manage their working staff for achieving the organizational goals and objectives.
Comparison in Between the Models
Shareholder Owned
Stockholders or shareholders often are found to be the owners of a company in which the board of directors mainly manages and takes care of the business activities and other organizational operations. The company that is mainly said to have owned by shareholders is also called a stock company. Shareholder ownership is not common within the normal scenarios (Morck and Yeung, 2003). This type of ownership is found within corporations that are subjected to the strength of the securities in the account of the company. Corporate insiders for example the large or majority shareholders are usually composed of finding family members and get directly associated with the activities of recruiting and selecting managers for the organization (Psaros, 2008). In such cases, the family businesses are mainly found to be operating under shareholders ownership in which a family member is the CEO of the company and the family members and make necessary decisions regarding the company operations and activities. Huge shareholders also have the authority to impose power on specific decisions that may or may not be useful for the other stakeholders of the firm.
Government Owned
A state-owned or government-owned model is a type of business enterprise where the government or state has the majority of control over the company operations and they may possess majority or minority ownership within the company (Sahasranamam, Arya and Sud, 2019). In the case of natural monopolies, the rise of government owned models are very common. This allows capturing the economies and also achieves a public objective simultaneously. Due to political influence and other state-related issues, the government-owned model of businesses usually is less efficient and capable than the private firms (Jackson and Muellenborn, 2012). Hence they sometimes bring in partial privatization within their operations to serve the public in a better manner. The state-owned firms may operate quite differently than the various other limited liability firms. The role of the public and advantages for employees are very much attractive in public firms as the compensations offered is quite attractive for the public. For this reason, people look for work in firms that are owned publicly.
Member Owned
Co-operative business or member-owned business structure can be availed by a firm that has a minimum of 5 members and equal voting rights and decision implementing powers regardless of the investments and involvements within the business structures. This type of business is very cheap in terms of registration and none of the members or directors can be below the age of 18 years (Young et al., 2008). Potential members seeking financial returns may be difficult to achieve. This also requires various ongoing requirements of education programs for the members of the business or organization. A member-owned business structure also has a separate legal entity where the members, managers, employees and directors shall not be liable for any of the debt incurrence unless the company faces some reckless fraud or negligence (Mitchell, Agle and Wood, 1997). A co-operative usually shows a limited phase of profit distributions among the members and the business structure also encourages a style of democratic management that promotes the concepts and ideas of sharing resources and ideas for making the organization more effective. Co-Operative business structures must comply under the rules and guidelines of the Co-Operatives Act 2009.
Contrast based on CSR Theories
The government ownership model is a comparatively more secure form of organization for the employees’ perspectives because they enjoy each and every benefit offered by the organization without any misrepresentations (Schillemans and Bovens, 2019). On the other hand, the members owned firms or business structures may are considered as the best business models in the present scenario. There is very little risk of the firm to survive any kind of loss. The members do have equal rights of voting while crucial decision-making processes for the business (Hertig, 2006). Even in the case of shareholder-owned businesses the individuals do have the chance of conducting financial frauds and misrepresentations for seeking personal benefits. Often the decision-making process within these firms proves to be negative because the implications made by the owners shall be focused mainly on their benefits rather than the public benefit.
The contrast between the three models can be easily carried out by the use of accountability, stakeholder's perspective and stewardship.
Accountability: In terms of accountability the government-owned firms may not be able to portray serious liability in terms of decision making and operations. The government-owned frameworks do have a lot of political influence and therefore make a lot of decisions that may or may not suit the workers and other stakeholders (Sahasranamam, Arya and Sud, 2019). Due to political connections the directors and CEOs of the companies often escape from difficult situations that are created by them. Often the officials are safeguarded by political entities and groups who have common benefits related to enforced decisions. On the other hand, shareholder-owned firms also have little accountability for ensuring the stakeholder's interests. These types of business frameworks only focus on the scenario of making organizational profit other than the stakeholder's benefits (Ireland, 1999). The directors or shareholders having a maximum amount of shares in the firm may also try to impose decisions that would not be beneficial for the company. In such cases, the directors and managerial boards may be held as the responsible authorities for any financial fraud or misrepresentation of business activities. On the other side, the firms with member ownership are best in terms of stating and accepting the accountability of the owners during any financial fraud or ethical misrepresentations within the business activities. Thus it can be said that the member-owned status of the company is very much essential for maintaining accountability and perfection in terms of organizational decisions.
Stake Holders Perspectives: This theory suggests that the group of stakeholders of the company such as employees, investors, suppliers have different roles in managing and operating the business in an ethical manner. This clearly states that the business does not possess any kind of obligations for the various stakeholders, such as the employees, business partners, governmental agencies and non-governmental agencies. In the case of Shareholder owned business structures, the individuals associated with the business are not given any kind of priority during any decision-making process or even is not answerable to the stakeholders for any kind of misrepresentation or fraudulent activities within the business. In the case of government firms, the stakeholders are addressed in a formative manner. They are informed about the various decisions and objectives of the firm beforehand. In the case of major faults, the government is also responsible for the whole act and the public also has the right to seek justification from the owner or government (Frege, 2002). Other than that the public firms also focus mainly on the welfare of the public rather than making a more profitable business. For the membership-owned businesses, the owners are responsible for all the activities that take place within the firm. The decision of the board members who have equal rights of voting is held as the core responsible person for any kind of negative impact in business that adversely affects the other stakeholders.
Stewardship: This particular theory states that the organizational managers who protect the interests and secure profits for the shareholders have to be satisfied and motivated while attaining organizational success. Employees and managers in such circumstances are often recognized as the owner of the jobs and thus work diligently according to the benefit of the organization. In the case of a publicly owned firm, the employees are mainly assigned individual ownership of their job designation. They do have some authoritarian power to enforce necessary decisions within the organizational activities that add to the profitability of the firm. In the case of a member owned organizational business, the employees are expected to work as per the directions and suggested guidelines of the owner-group. This is done in particular to ensure that the company does not suffer any kind of loss or challenge of a bad reputation due to the wrong step from the agents or employees (Errasti, Bretos and Nunez, 2017). In the case of shareholder-owned firms, the employees are also required to work according to the interests of the owners and work in regards to achieve personal success for any shareholder who has the majority shares under the belt. Thus it can be said the shareholder-owned company or businesses is the most effective form of stewardship that is found within the Australian firms.
Conclusion on Corporate Governance Report
The following write-up has described the particular theories of stewardship, agency and accountability so that they are able to make new changes within their framework of business. In terms of accountability, the model of membership-owned business was found to be most effective. Other than that the membership-owned business also provides greater scope for being transparent in terms of decision making and accountability towards the public and other stakeholders. The shareholder-owned business models lag in terms of proving perfect accountability measures and importance for the stakeholders. They are mainly focused on the theory of Stewardship for running the business in a more profitable manner. In the case of publicly owned firms, the accountability lies on the government as it is responsible for any kind of changes or malfunctions within the business activities. Thus it can be said that business accountability is least within the firms that are owned by the shareholders and are most in the case of businesses that are owned and operated by a group of democratic members.
Recommendations on Corporate Governance Report
- Some essential approaches are needed to be implemented within the corporate structures of Australian firms and businesses so that they are able to achieve better milestones or outcomes in terms of business profitability (Clarke and Henderson, 2016). The majority of stakeholders in business shall be limited towards any decision making process along with enforcement of their decisions on the other stakeholders of the company.
- Accountability of owners in public, as well as private firms towards the other stakeholders, shall be increased with the approach of collaborative working and also ensuring a democratic work environment within the organization (Boyd, Haynes and Zona, 2010). This may include a giant business that is owned by an individual group of shareholders or families who own the business. Integrative management of the working staff shall reduce the conflicts of accountability within firms during any turmoil or internal hazard within the business.
- Responsibility towards the stakeholders can be increase with the help of the introduction of the Corporate Veil within any public or private firms. This would protect the rights of the stakeholders by making the owner or shareholders responsible for any miss functioning (Cook, 1995). Even the shareholders and directors are also safeguarded during situations when the company has incurred a huge amount.
- Public companies specifically should appoint separate agencies for monitoring the activities of the directors and shareholders of a business. They shall also limit the powers of managers and directors within various public departments to ensure the ethical and legal enactment of the audit processes along with separate financial reviews on an annual or half-yearly basis.
References for Corporate Governance Report
Boyd, B., Haynes, K. and Zona, F., 2010. Dimensions of CEO-Board Relations. Journal of Management Studies, 48(8), pp.1892-1923.
Clarke, B. and Henderson, G., 2016. Directors as guardians of the public interest: lessons from the Irish banking crisis. Journal of Corporate Law Studies, 16(1), pp.187-220.
Cook, M., 1995. The Future of U.S. Agricultural Cooperatives: A Neo‐Institutional Approach. American Journal of Agricultural Economics, 77(5), pp.1153-1159.
Errasti, A., Bretos, I. and Nunez, A., 2017. The Viability of Cooperatives: The Fall of the Mondragon Cooperative Fagor. Review of Radical Political Economics, 49(2), pp.181-197.
Frege, C., 2002. A Critical Assessment of the Theoretical and Empirical Research on German Works Councils. British Journal of Industrial Relations, 40(2), pp.221-248.
Frege, C., 2005. Varieties of Industrial Relations Research: Take-over, Convergence or Divergence?. British Journal of Industrial Relations, 43(2), pp.179-207.
Hertig, G., 2006. Codetermination as a (Partial) Substitute for Mandatory Disclosure?. European Business Organization Law Review, 7(1), pp.123-130.
Ireland, P., 1999. Company Law and the Myth of Shareholder Ownership. Modern Law Review, 62(1), pp.32-57.
Jackson, G. and Muellenborn, T., 2012. Understanding the Role of Institutions in Industrial Relations: Perspectives from Classical Sociological Theory. Industrial Relations: A Journal of Economy and Society, 51, pp.472-500.
Mitchell, R., Agle, B. and Wood, D., 1997. Toward a Theory of Stakeholder Identification and Salience: Defining the Principle of Who and What Really Counts. The Academy of Management Review, 22(4), p.853.
Morck, R. and Yeung, B., 2003. Agency Problems in Large Family Business Groups. Entrepreneurship Theory and Practice, 27(4), pp.367-382.
Psaros, J., 2008. Australian Corporate Governance. Frenchs Forest, N.S.W.: Pearson Education, pp.1-22.
Sahasranamam, S., Arya, B. and Sud, M., 2019. Ownership structure and corporate social responsibility in an emerging market. Asia Pacific Journal of Management,.
Schillemans, T. and Bovens, M., 2019. Governance, accountability and the role of public sector boards. Policy & Politics, 47(1), pp.187-206.
Young, M., Peng, M., Ahlstrom, D., Bruton, G. and Jiang, Y., 2008. Corporate Governance in Emerging Economies: A Review of the Principal-Principal Perspective. Journal of Management Studies, 45(1), pp.196-220.
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