Corporate Goverance and Code of Ethics - Article Example

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Summary

This essay analyzes that corporate governance is a term that is broadly used to refer to the set of laws, customs, rules or policies and processes that forms the basis of the relationship between the managers, shareholders, suppliers, employees as well as other business stakeholders…

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Subject: Management
Type: Article
Level: Undergraduate
Pages: 3 (750 words)
Downloads: 3
Author: modestoabernath

Extract of sample "Corporate Goverance and Code of Ethics"

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This essay will focus on the role of corporate governance in creation and adoption of the corporate code of ethics. It is factual that the quality of management in an organization is determined by the effectiveness of its system of corporate governance. Proper corporate governance should aim at bringing onboard honest and competent employees. Besides, it should be geared towards instituting a framework that will ensure adequate employees compensation so that they are motivated to give their best to the company.

Corporate governance together with codes of ethics plays a crucial role in the success of a business because it shapes the way the company is viewed by the stakeholders. This article shall focus on the factors that influence the creation and adoption of the corporate code of ethics by a firm as well as those that determine its effectiveness. Some of these factors include the effects of the board diversity, board stock ownership and the constituent of the board directors on the creation of the corporate code of ethics.

High profile scandals that involve corporate officers have in the recent years led to an increased attention on the subject of corporate governance. Research reveals that board of directors plays a significant role in establishing the code of ethics in a firm. Thus, it is necessary for an organization to engage the services of the directors that have the competence of planning and overseeing the corporate code of ethics. Studies show that researchers, government regulators, and practitioners are all in agreement that independent directors are more suitable than the insiders in championing the interests of the shareholders and other stakeholders because in most cases they possess vast experience and it is also presumed that the may make the board be more independent.

In addition, they tend to have a higher degree of awareness on their moral and legal commitment.

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