The Views of the Managers in the International Organisations Regarding Global Convergence - Research Paper Example

Contents: Part One Part Two 7 Methodology 8 Sampling 9 Variable and Questionnaire 9 Methods of Data Analysis 10 Weaknesses and Implications 11 Rationale of the Research 11 List of References: 12 Part One In present times, study on future structure of corporate governance is gaining a lot of importance in academic research. The future outlook of the systems of corporate governance can be classified into three groups of schools based on the global convergence and global divergence model. The first school views corporate governance towards the market oriented standard of the Anglo-American that is global convergence. The second school supports the global convergence model but with a difference; according to them, a hybrid corporate governance model is ideal. The third school or the third group does not believe in a particular global standard but believes in a differentiated solution, which is based on a number of relevant corporate differentiation criteria; this school is known as the Diversity School as they believe in global divergence. (Berghe L. V. D., 2002, A) Proponents of the divergence and convergence theories put forward the persistence of cultural diversity in the economic organizations. The convergence school views diversity as a temporary state of affairs and states that societies have a tendency to grow in a similar manner. The divergence school is of the view that the very existence of cultural diversity is the socio-economic reality. (Paauwe J., 2004) According to some academics, globalization can lead to a single model, which closely resembles with that of American Corporate Governance Model as they believe that it is the most successful model. Some of the people in spite of supporting convergence thesis do not agree that it has to be a copy of Anglo-American convergence model. According to them, a hybrid system can emerge on the basis of the best features of the prime governance models and also supports the hybrid stream of thinking of the Standard School. But, according to the Diversity School academics, global convergence will not happen. According to them, cultural diversity and the difference in legal as well as economic systems along with the variant aspirations and goals prevalent in the society will not lead to global convergence. (Convergence or Divergence: Evidence From The Corporate Governance Literature, May 2007) Mainstream governance thinking is highly influenced by the geographical boundaries. It is practically impossible to find two countries with identical characteristics of corporate government; actually each country is characterised by its unique governance model. Corporate Governance model is referred as the specific structures and processes, which are embodied in a country’s institutional, legal and cultural context. (The Spectrum of Governance Models, May 2007) Attention towards corporate governance has mainly grown out of shareholder activism of the institutional shareholders in the Anglo-American context. Under the pressure of shareholder activism, the listed firms along with the stock exchange authorities realised the need for good corporate governance. Several other driving forces also jointly influenced corporate governance. The institutional shareholder primarily focused on the rights of the shareholders and the protection of the minority shareholders and the accountability towards the disclosure issues and shareholders. This is referred as positive drivers. Some other corporate government recommendations were initiated after business scandals, financial distress, etc., which is referred as negative or defensive drivers. (Berghe L. V. D., 2002, A) There are a number of obstacles in order to establish one European financial market. One of the prime obstacles in order to reach the goal in Europe is the diversity in governance structures and the company laws all across Europe. A number of views proliferate regarding the future outcome of convergence as to what extent the Anglo-American Governance model should be the reference base for Europe or should it develop its own hybrid governance model or not. A survey was conducted on the basis revealed that as much as 40% of the participants were of the view that hybrid corporate governance system was to emerge for the listed companies, whereas, 32% opted for outsider system. The remaining 29% of the participants were found to be followers of Divergent School as they were of the view that different systems would continue to exist. It might happen that that the professional background of the participants influenced their decision regarding the type of corporate governance. Most of the people from the business community were of the view that Europe would evolve towards hybrid corporate governance. Most of the academicians opted for corporate divergence and the participants who worked in the non-profit sector believed that outsider system would emerge. A distinct relationship in between the geographic origin and the response of the participants was also prevalent. The participants were segregated in three groups. The first one was UK, where there was Anglo-American governance model, the second one was continental European countries with one-tier board structure and the third, continental European countries with two-tier board structure. (Berghe L. V. D., 2002, B) The non listed companies in Europe usually experienced a number of corporate governance challenges along with other potential problems. This was because they generally lacked the scrutiny of well informed and powerful market parties along with the critical eye of the market watchers. The pressure for good governance at first occurred at the level where the outsiders and external shareholders interfered, that is, at the level of the companies that are enlisted on the stock exchange. In a survey, most of the participants were of the view that corporate governance system would continue to exist for the non-listed companies as well. 25% of the participants viewed convergence towards the hybrid convergence model for the non listed companies, whereas, 10% of them thought that Anglo-American governance model would be the only surviving governance model for the non listed companies. Cross reference presumes that corporate governance system can be viewed as a living organism, which is able to adjust itself with the changing environments and introducing elements from other systems as well. The opposite belief is that the possibility of the cross reference is hampered as corporate governance model is viewed as a system in its own right. Such views of corporate governance system are based on the framework of legal, cultural, sociological and economic characteristics. (Berghe L. V. D., 2002, B) According to Mauro Guillen, it is quite likely that the companies and nations will continue exhibiting local characteristics as different countries have followed variant economic development patterns. Actually, a complex mix of legal, historic, economic and political factors outlines the corporate landscape of each and every nation. Therefore, the board structures and corporate governance vary all around the world. According to Guillen, the United States model evolved in such a country where the companies have a typical characteristic of diverse and wide shareholder base and the governments, banks along with other interests have very little stake in the corporations. In contrast, Europe has larger and fewer stakeholders and often, cross holdings by the banks demand representation on board. The labour inions play a more important role in German society in comparison to the United States, and therefore, have a place in corporate governance for a long time, which also reflects their position in the society. In Asia, the corporate structures that is based on diversified business groups with their cross shareholding by banks, have driven the national economies to form a sophisticated manufacturing from rice cultivation economies, in only a few generations. So, it is not quite surprising that they are not ready to alter the system that has worked quite well. The author argues that the variant governance systems are suitable for different industries and the global investors also stand to benefit from these diverse governance structures, which is also likely to enhance corporate performance. (Divergent Opinions, January 2009) Guillen further with the example of Japanese system that has traditionally featured large boards of the management directors, which can be effective for those companies in the industries that are capitalized heavily and also require long term horizon, as for example the auto industry. In comparison, the US system that is relatively more independent of management is relatively more flexible and is also able to create excellent environment for innovative and start-up companies, like those based in Silicon Valley. Therefore, Guillen says that a homogeneous world is never going to happen as I is not the way the world works. Even, from the investors’ point of view, it is not clear whether they will like it or not. They actually thrive on differences, which are reflected in the return and risk balance, some require secured low risk investments while others want higher risk companies that have better potential in order to pay off big. The investors can cope with the different rules in Japan and United States, as long as the rules in the countries do not change suddenly. (Divergent Opinions, January 2009) It is quite clear that the views of Mauro Guillen point towards global divergence; however, the views of some other authors point towards global convergence. According to Useem, management professor from Wharton, states that probably the companies all around the world are converging on a similar model that is developed largely in the US, in response t5o the growing global power of the investors. As a result of liberalisation and new technology of the government control over capital flows, it is quite possible that investment can move in and out of the countries, more freely than previous times. He says that the companies that globalise ownership or operations know that by adopting the internationally accepted global standards, they will be able to compete against other firms. According to Guillen, probably the central focus of corporate governance is the corporate board structure. (Is One Model of Corporate Governance Likely, or Even Desirable?, January 2009) Another driving force for convergence is regulation. The passage of the Sarbanes-Oxley Act of 2002 prevalent in the United States, is enacted by other countries, who also follow alike regulatory provisions, which also focus on a number of key elements of the board structure as well as of overall governance. Jay Lorsch, the professor of Harvard Business School Human Relations, contends that the boards are converging in the direction of a common model. It is particularly string amongst the industrialized nations like United States and Europe, and the momentum comes from regulatory requirements for the public listed firms, which apply to the companies looking for capital investment by trading the US exchanges. (Independent of Management, January 2009) It is clear that both global convergence and global divergence has its own merits and demerits. But, as there are differences in all sectors of the society and a complex mix of legal, historic, economic and political factors shape the corporate landscape of the countries, it is probably the global divergence that can more effectively meet up to the challenges that are experienced by the managers in the international organisations. Part Two It is not so easy to find an effective solution of the problem that whether global convergence in able to explain the likely challenges faced by the managers in the international organisations, or it is the concept of global divergence that can provide more effective explanation. Therefore, it is better to conduct a primary research in order to find out what the organisations think in the present context. Methodology The first approach towards a research is developing the research method. It consists of the scientific and planned techniques, which are value neutral; its main purpose is to maximise the accuracy of the proposed research. One of the most important things in a research is the proper representation of the researched population by proper and effective sampling, which can ensure the adequate representation of the studied population. (What Are Research Methods?, April 2008) This particular research is proposed to be inductive as the result based on the responses will be generalised. It will also be a cross sectional survey as the response of the population will be made on a single time frame. (What is Methodology?, n.d.) The research will try to find out what are the views of the managers in the international organisations regarding global convergence and global divergence of the organisations and what according to them can effectively explain the challenges faced my managers in the modern day organisations. One of the best ways to find an effective answer to this research question is to interview the managers in the present Multi National Organisations regarding their individual views. Another method is to circulate the questionnaire amongst the managers in the international organisations, and ask what challenges they face and what according to them is more appropriate – convergence or divergence of the organisations. Probably the best way is to conduct the research through interview method based on a well prepared questionnaire. Sampling In order to conduct the research, it is quite necessary to select the area of research or the population on whom the study is based. It is nearly impossible to conduct the research on all the Multi National Organisations; so, it is restricted to the companies that are operating in United Kingdom. It is better if it is possible to carry out the research in the prominent organisations all over UK. If it is not possible, then the research needs to be conducted in a particular region, where there are more multinational organisations, in order to schedule interviews with the higher management personnel. It can be regarded as stratified random sampling, as the organisations will be selected or stratified, and the respondents or the managers will be selected randomly from each of these organisations, as per selected variable. Once the sample is selected, it is better to call them and fix an appointment by clearly stating the purpose of the research. Interview technique is the best but if it is not possible then the questionnaire can be mailed to them and they can be requested to fill it up and return it within the stipulated time. Then the data can be analysed both qualitatively and quantitatively on the basis of the responses. (Probability Sampling, October 2006) Variable and Questionnaire Variable selection is one of the most important thing based on which the data will be analysed. In this particular research, it is better to analyse the data on the basis of the hierarchy in the organisation, that is managers, senior managers, deputy managers, general managers, etc. The questions in the questionnaire can be divided into two portions; first, to know the challenges that are experienced by the managers, and secondly, how they propose to solve them in regard to convergence and divergence concepts. It should contain open and close ended questions. Questionnaire is an easier option to reach to a larger audience as it is not possible to interview each and every respondent, face to face. However, interview reveals a number of aspects as the respondent’s attitude can be judged through a questionnaire. The questionnaire is important in case of interview, as the questions can be the guidelines for the interview. (Questionnaire Design, n.d.) Methods of Data Analysis The first and foremost thing required to analyse the data is to clean it against any ambiguity and to organise it; the process is referred as data preparation. The process involves checking the accuracy of the data developing database structure to analyse it. Inferential and well as descriptive statistics is intended to derive a conclusion. (Analysis, October 2006) Weaknesses and Implications In any research, it is really necessary to identify the problems and if possible to plan it accordingly, in order to overcome the problems. One of the common problems is the unwillingness of the respondents. It is necessary to overcome the problem by explaining to them the importance of the research, the rationale behind the research and how their views can contribute to the research. Access to equipments and reliability are also quite important. Therefore, it is really important to analyse the data as per reliability measures. The research should also be free from any biases, which can be a threat to the reliability and the validity of the data. Rationale of the Research The rationale of the research is to find out the views of the managers in regard to the challenges faced in the modern day Multi National Organisations and how do they cope with it. It will also evaluate their views on global divergence and global convergence; what according to them is more effective in overcoming the challenges. It is quite important to inform the respondents about the outcome of the study. As it will be based on the views of the respondents, the outcome is expected to be valuable if it is carried out properly. It can be really valuable and satisfy the rationale behind the research, that is which theory according to the managers of the multi-national organisations is more effective – the global divergence or the global convergence. List of References: Analysis, (October 2006), Research Methods – Knowledge Base, from Berghe L. V. D., (2002, A), Ch. 4 - European Convergence or Divergence: An Evaluation By Practitioners And Academics, Corporate Governance In A Globalising World: Convergence or Divergence? A European Perspective, Kluwer Academic Publishers, retrieved on March 12, 2009, from Berghe L. V. D., (2002, B), The Future Outlook Corporate Governance in Europe, Ch. 4 - European Convergence or Divergence: An Evaluation By Practitioners And Academics, Corporate Governance In A Globalising World: Convergence or Divergence? A European Perspective, Kluwer Academic Publishers, retrieved on March 12, 2009, from Convergence or Divergence: Evidence From The Corporate Governance Literature, (May 2007), Ch. 2, Corporate Governance in a Globalising World? Convergence or Divergence? Divergent Opinions, (January 2009), Is One Model of Corporate Governance Likely, or Even Desirable?, Knowledge Wharton – Leadership and Change, retrieved on March 12, 2009, from Independent of Management, (January 2009), Is One Model of Corporate Governance Likely, or Even Desirable?, Knowledge Wharton – Leadership and Change, retrieved on March 12, 2009, from Is One Model of Corporate Governance Likely, or Even Desirable?, (January 2009), Knowledge Wharton – Leadership and Change, retrieved on March 12, 2009, from Paauwe J., (2004), Ch. 8.2 – The Convergence-Divergence Debate, HRM And Performance – Achieving Long Term Viability, Oxford University Press, retrieved on March 12, 2009, from Probability Sampling, (October 2006), Research Methods – Knowledge Base, from Questionnaire Design, (no date), from The Spectrum of Governance Models, (May 2007), Ch. 2 – Convergence or Divergence: Evidence From The Corporate Governance Literature, Corporate Governance in a Globalising World? Convergence or Divergence? What Are Research Methods?, (April 2008), from What is Methodology?, (no date), Read More