Ethics in Corporate Governance - Essay Example

It also sets out the rules and procedures involved in decision-making. Corporate governance draws its principles from various theories including economics, ethics, politics, finance, organizational theory, law, and psychology. Business corporation managers are required to manage business activities on behalf of the owners, while governors are required to ensure that the business is managed properly. Therefore, governors are custodians of the stakeholders. As a result, companies need to disclose corporate governance issues in their annual reports and ensure that they comply with the principles of corporate governance.

In the UK, the principles and provisions of corporate governance are provided in the UK Corporate Governance Code 2012 (Financial Reporting Council, 2014). Companies listed in FTSE need to comply with these principles and provisions and disclose their corporate governance activities. As custodians of the shareholders’ interests, governors should behave ethically and call for managers to act ethically as well (Crane & Matten, 2010). This leads to the concept of ethical governance which involves doing the right thing to fulfill the interests of a wide range of stakeholders.

One of the FTSE companies is Barclays Plc a multinational corporation offering financial services in 50 countries, with core business operations in South Africa, the UK, and the USA. The company operates under the regulatory standards of local and global markets. It employs 132,300 people and 732 senior managers globally. The company’s profits after tax have been declining from £4,499 in 2010 to £845 in 2014 (Barclays Plc, 2014). This is attributed to the sovereign debt and economic crisis that affected European countries since 2011. The economy is now in recovery and is expected to improve. In its annual report, Barclays discloses information about its corporate governance, stakeholders, and ethics.

The role of corporate governance of Barclays is set from the beginning. The chairman of the board states that the key priority of the governance board is to determine the strategic aims of the business and provide the right leadership and direction for the achievement of the organization’s aims and objectives (Barclays Plc, 2014). It monitors performance to secure the consistent execution of the right strategy on behalf of the owners. Acting as an independent check and balance to the executive management team, the board also provides oversight and sets the direction for the company’s overall management. The key aspect of Barclay's corporate governance is that it operates within a shared agenda and perspective of what to achieve, and encourages mutual respect throughout the organization.

Barclays claims that it is complying with the UK Corporate Governance Code as a member of the London Stock Exchange. The company is also keen on disclosing these issues. There are two issues that the company discloses and admits that the board did not comply with the code, and discloses all the other codes to which it has complied. It did not comply with C3 on Audit Committee and Auditors and E2 on constructive use of the AGM.

According to the annual report of 2014, the company did not comply with provision 3.7 which requires companies to provide new tenders for external auditors at least once every ten years. The company did not comply because it was to examine the issue of tendering external audit contracts after the EU published the rules of the audit tendering process. This happened in 2014, and the company planned to start compliance in 2015 by tendering a new audit contract. Secondly, the company did not comply with provision E2.3 of the UK Corporate Governance Code 2012 which provides that the chairman should make sure that all members attend the annual general meeting (AGM). However, Lucas-Bull who was in South Africa did not attend the meeting due to transport problems. This shows non-compliance.

The fact that the company disclosed these non-compliance issues has a positive impact on the integrity of the company because it shows a sense of stewardship on the part of the board (Nordberg, 2011). The board’s responsibility is to take care of the interests of the shareholders, and the absence of a board member in an AGM against the provisions of the code does not show the board’s commitment to the interests of shareholders.