The Purpose of Developing Corporate Governance in a Business Entity - Essay Example

Student’s Name: Instructor’s Name: Course Code & Name: Date of Submission: TABLE OF CONTENTS Executive summary 1 Abstract 2 CORPORATE GOVERNANCE 3 The Purpose of Developing Corporate Governance in a Business Entity 4 Theories and Global Commerce 5 CONCLUSION 8 REFERENCES 9 Executive summary This essay seeks to analyze the implementation and impacts of socially innovative commerce in the economy. It analyzes scientific aspects of innovation that are geared towards achieving the goals and objectives of every business entity. These arguments were based on speech made by Simon McKeon, the chairman of group AMP financial services in a daily newspaper. It demonstrates scientific innovation that is needed to spear head business activities towards achieving high levels of profitability and stability. Global business involves risks and uncertainties that require mangers and innovators to come up with new scientific innovation to improve their businesses. The analysis of the Simon McKeon speech is based on corporate governance and theories and global commerce. Abstract In modern economy, business sector has contributed up to 70% of country’s economy through tax levies on businesses. However, investors sometimes may view their business stability as being “country clever” because of their position ranking or production. According to McKeon, the chief executive officer of AMP financial services, it is not only the type of position experienced by a business entity, neither is production status, proper innovation of new scientific methods is a key tool towards achieving high success. Many large enterprises and small and medium term businesses operating globally anticipates to achieve high profitability levels. They are never concerned about how to improve their products, how to satisfy their customers better, how to diversify their products, product branding and corporate social responsibility. Business firms practicing social corporate responsibility over the past decades have experienced high growth rate because they not only attract new customers but also keep existing customers. In Simon’s view, the success of every county is to indulge its efforts towards integrating relationship between science and business. They should be able to understand scientific methods related to businesses and implement them effectively. Silicon Valley however being smaller has many businesses opportunities that make it an ideal choice for open minded investors globally. Developing an effective innovative culture that incorporates scientific techniques and skills is fundamental towards achieving great success in every business entity. Developing nations such as Silicon Valley sometimes lack the aspect of innovative culture that makes them admire oversea developments. Utilization of resources is based on the fact that resources are effectively used for intended business objective. Failure to integrate science with business has attracted less innovative culture. According to McKeon, chief director of AMP financial services, employing skill and technical manpower in business firms is an important practice towards implementing scientific skills in business. Professionals with PHD should be employed to take up business positions thus becoming easier to implement business ideas. CORPORATE GOVERNANCE Corporate governance is a wide term that incorporates legal rules, systems, relationships and major processes by which a certain authority uses to control the operations of its business. They are legal frameworks that are constructed by business firms to control business operations. The code of conduct that is required to accomplish certain task within a business firm by all stakeholders is a key towards achieving business goals and objectives [Kar08]. According to McKeon, chief director AMP financial services, business firms should identify means on how to be the best in the market. They should focus on how to develop their skills and innovation culture towards meeting the demands of the customers in the market. A corporation and business entities have legal responsibilities towards shareholders, business owners, creditors and entire society [Kar08]. This requires managers to effectively develop sound policies that aim at maximizing the value of shareholder’s wealth. The aspect of corporate governance is more than the relationship between a business firm and external environment. It goes beyond the relationship aspect into accountability and responsibility towards the operations of the business. Corporate governance are mechanisms and process that can be used to control the activities within a corporation. It seeks to identify the responsibilities and the entire rights of shareholders and management team in carrying out their activities. According to [Mar09], corporate governance incorporates rules and regulations that are used to make firm decisions regarding corporate affairs. It seeks to monitor, manage and evaluate various policies with an intention of maximizing the value of shareholder’s wealth. In global business operations, code of conduct is an essential practice that prevents two parties involved in trade against trade risks and uncertainties. According to Mr. Simon, a chief director, AMP financial services, adopting better scientific innovation in managing business entities is much worth than just concentrating on code conduct. He argues that, to think about where the nation is heading in terms of business forms a strong basis towards developing business activities in the country. Innovation in business is not an art but an attitude and culture that need to be adopted by business firms. Defining better mechanisms and processes within a business entity is a strong corporate governance pillar that leads an organization towards achieving goals and objectives of the business. The Purpose of Developing Corporate Governance in a Business Entity Every business firm strives to achieve high growth rates in the market by developing new products that meets the needs and preferences of shareholders. With effective adoption of innovation techniques and culture, corporate governance will assist an organization to treat shareholders equally. [Mar06]. The organization should work in accordance to the needs of shareholders. Effective corporate governance will define clearly how an organization should achieve its goals and objectives. It defines better mechanisms and producers to be adopted to improve the profitability of the firm. According to McKeon, the major objective of every manager is to design a proper working mechanism that incorporates both stability and profitability of the firm. Such achievements require the firm to develop sound policies, rules and regulations that are used to make firm decisions regarding corporate affairs. The director seeks attention from the governments and politicians to indulge their efforts in innovative culture. The government through their regulatory systems should develop innovative policies and processes that aims at improving business activities within the country. The board of directors needs to have high skills and techniques to review and evaluate the performance of a business and to provide lasting solutions where necessary [Kar08]. Employing qualified personnel is not a waste of money and time. Mr. McKeon terms it as a great investment that seeks to maximize total output from a given investments. Qualified personnel are able to critically evaluate, monitor and to develop sound innovation policies. Ethical behavior is a fundamental requirement in every business unit. The way employees and management integrate their activities with an aim of meeting their target goals and objectives in a business reflect the success of the firm. Good ethical behavior motivates the management team to develop sound innovation programs that aims at integrating science with business. [Tho09]Business analysis and metrics are among major scientific measures that have been adopted to solve business issues. Matrices such as BCG matrix and business matrix can be used by managers to make firm decisions. Theories and Global Commerce Business operations can occur globally through exchange of goods and services between parties in different countries. The act of purchasing and selling of goods and services globally is termed to as global commerce. McKeon argues that integration of business entities and diversification of products and services is a key towards achieving success of the business. There are theories that have explained clearly McKeon’s ideas in his speech. Adam smith’s comparative advantage theory defines how to different countries produces goods and services at a lower cost. The major objective of every business firm is to maximize total outputs while minimizing the cost. A country is said to have a comparative advantage over another if it produces maximum outputs at lower cost[Mar06]. This trend is exhibited in McKeon’s speech when he said that politicians should put their efforts towards achieving great objectives in their mandates. They should come up with policies and innovations that aim at improving large and small business enterprises. Australia and Silicon Valley are two nations that can utilize their resources to produce maximum output at low cost. However, Simon says that, investors in Silicon Valley tend to admire business activities in Australia. This practice happens because Silicon Valley has never identified its opportunities and invests their time and funds into it. Mechanisms in Australia and Silicon Valley vary with time. How investors operate their daily activities in Australia differs with those of Silicon Valley. Despite country ranking, resource utilization is an essential practice. It is unless the government defines where the nation ought to be that sets a clear path towards achieving great success in business. [Mar09]. Comparative advantage theory seeks to compare production levels between two countries. It argues that a country is said to have comparative advantage over another when it can maximize available resources to attain full production. Firms seek to maximize shareholders wealth through attaining high levels of output. According to McKeon, innovation and new technological advancement should be adopted by business firms within a given nation. He argues that growth is anticipated through proper formulation of policies that favors innovation. Many business firms and small scale business firms indulge their efforts on digital measures such as internet marketing. However, it is essential for companies and business firms to know the best strategies to be used to meet objectives and goals of the firm. Simon, chief executive of AMP financial services in his speech describes many entrepreneurs in developing nations as not being opportunistic. Investors in Silicon Valley want to achieve high levels of output as those of Australia. However, due to lack of innovative culture, it becomes difficult to implement their ideas (Johnes, 2006). The aspect of innovation goes beyond integration of business units into monitoring, evaluating and analyzing key business units to detect any lag and to develop effective solutions. It involves identifying strengths, weaknesses, opportunities and threats and taking advantage of it. Furthermore, innovation seeks to improve the quality of management regarding offering of services. McKeon proposes that firms should consider employing PHD qualified personnel who can be able to make firm decisions. Politicians and the government should seek to put more energy on innovation; they should push for implementation of innovative ideas that aims at improving business sectors. Factor production theory argues that countries should specialize in trade with regard to factors of production available in their countries. [Kar08] States those classes within an economy are important factors of production. Investors should make use of capital, land, technology and labor to improve the levels of output in the firm. Shareholder maximization will only be possible if sound policies are formulated to comply with goals and objectives of the firm. Resource utilization gears the firm towards attaining maximum output while minimizing cost incurred. Dependency theory argues that resources tend to flow from the periphery to the wealthy. It argues that the rich people become rich at the expense of the poor people. Large and small business operations strive to achieve strategic goals through implementation of set objectives into reality. The core objective of every business venture is to reduce the cost of production incurred by the firm while maximizing on the level of profitability. This motive is only achievable if some other factors including well managed IT services (Johnes, 2006). Due to stiff market competition and global changes, large and small business firms have adopted technological methods of managing information systems to help make work of the management more easier thus large profit margins. CONCLUSION Most firms anticipate for high levels of profitability and shareholder maximization. However, adoption of new technological advancements and innovation techniques is fundamental towards attaining success. It is important for business firms to identify how to be the best in the market, how to expand their market opportunities, threats and weaknesses within an organization and to formulate effective measures to solve it. Despite the fact that most developing nations do not make use of their resources, they can increase the level of outputs if politicians indulge their efforts in innovation skills that aim at maximizing shareholders wealth. REFERENCES Estes, R. W. (1996). Tyranny of the bottom line. Why corporations make good people do bad things. 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