Corporate Governance - Research Paper Example

Course Name: Course Code: Project Title: Corporate governance Student name: Student ID: Instructor’s Name: Date Semester: Table of Contents Table of Contents 2 Corporate Governance 2 Introduction 2 Importance of the Study 3 Literature Review 3 Article 1 3 Results 4 Article 2 5 Results 5 Article 3 6 Results 6 Article 4 7 Results 7 Article 5 8 Results 8 Comparison of the results from the articles 9 Summary 10 References 11 Corporate Governance Introduction Corporate governance is a system that oversees and directs the operations of the company (Norman, 2004). It is influenced by both internal and external factors. The internal factors include the mechanisms used by the board of directors, the management, chief executive officer and the contributions by the employees towards the realization of the set objectives and goals. The external stakeholders include government agencies, shareholders, the suppliers, customers and the creditors. The main aim of corporate governance is to ensure that the company fulfils it aims and objectives as well as that of all the stakeholders. The paper therefore discusses the concepts of corporate governance and how they influence the operations of the company according to the summary of five journals. Importance of the Study The importance of the study is to analyze the principles of corporate governance and determine the extent in which it contributes to the accountability of an organization. This is because conflict of interest among the stakeholders in most organizations leads to negative outcomes for the organization. The principles of corporate governance are also important in terms of reducing the conflict of interest and thus playing an important role on the operations of the company. The corporate governance policies are also important in terms of ensuring the success of the company as well as the contributions of the company towards the growth of the economy. The study of corporate governance is also important in terms of determining whether the company is fulfilling the needs of the stakeholders and its ability to uphold the laid out laws and policies. Literature Review Article 1 Stanislav, M. (2008). Corporate governance as political insurance: firm-level institutional creation in emerging markets and beyond. Socio-Economic Review, Volume 6, Issue 1, pp. 69 – 98. Stanislav (2008) aims at addressing the effects of politics on corporate governance and how it can affect the operations of an organization. The methods used to collect information for the compilation of the paper includes interviews, questionnaires and literature reviews. The interviews were conducted with the stakeholders of various state corporations as well as private companies. Results The author argues that corporate governance is an issue that attracts the attention of most stakeholders in a given industry. Internationally acceptable standards of corporate governance have been established and the forms are going global. This is due to the presence of a new market in some of the countries. However, in some of the countries, the government is a major external stakeholder as it controls most sectors. This has lead to the issues of corporate governance being politicized in some countries. The firms which operate under the influence of politics from the stakeholders always suffer a risk incase the state intervenes in the operations of the company. The corporate governance measures and principles are thus important for firms operating in such environments as they may end up with losses. On the other hand, the external financing is one of the factors that affect the corporate governance in some of the companies. This is because the firms have to put in place measures that will ensure that the financers are protected from any losses. This is common for most firms that venture into new markets. The operation of a company venturing in the new markets is always determined by the stakeholder which includes the government agencies as they are responsible for developing policies (Stanislav, 2008). Article 2 Dalkilic, F. et al, (2012). CEO turnover and corporate performance relationship in pre- and post- IFRS period: evidence from Turkey. Journal of Business Economics and Management, Volume 13, Issue 3, p. 421. The article aims at establishing the effects of executive remunerations on corporate governance. The methods used to collect information for the compilation of the paper was through interviews with the chief executive officers from different organizations. Results According to the writers, the chief executive officer is a major stakeholder involved in the issues of corporate governance. The success of an organization in terms of ensuring accountability depends on the strategies used by the chief executive officer. However, it is also important to note that the chief executive officer is an interested party in terms of corporate governance. This is because the chief executive officer expects to be paid in order to perform his duties. The remuneration of the officer plays a crucial role in determining their performance. Corporate governance requires the chief executive officer to be ethical, accountable as well as active when implementing the policies of the company. According to research, the turn over for the chief executive officer has a direct impact on the corporate governance. It is also evident from research that the poor governance has some impacts on the corporate governance. However, due to the existence of alternative mechanisms of governing an organization, the corporate governance may not be affected. The remunerations for the chief executive officers is however influential in the areas of corporate governance. Poor remuneration of the CEOs may result into poor performance of the company which impacts negatively on the corporate governance (Dalkilic, et al, 2012). Article 3 Yulimar, V. et al. (2012). Corporate Government Mechanism, Company Size, and Earnings Management. GSTF Business Review (GBR), ISSN 2010-4804, 04/2012, Volume 2, Issue 1, p. 170. The article aims at establishing the factors that affect the corporate governance within an organization. The methods of data collection used involved literature review and interviews with various stakeholders in the corporate governance frame work. Results According to Yulimar et al. (2012), corporate governance is affected by several factors within an organization. According to the authors, the factors that affects corporate governance includes the institutional ownership, the size of the audit committee, the size of the company, the earnings of the managers and the managerial ownership of the company. Transparency and accountability within an organization is also important in terms of good corporate governance. The ownership of the company plays an important role in determining the rate of conflict of interest within the organization. The size of the company determines the operations and transactions that the company has to undertake. This also plays a vital role in determining the profits that the organization is able to make. These factors are important concepts of corporate governance as they determine how the organization is run. Transparency and accountability are the concepts that guide an organization in terms of achieving good corporate governance. In the presence of transparency and accountability, all the transactions will be carried out in an open manner. This is important in terms of reducing the conflicts among the stakeholders. The earning of the management is also determined by the size of the company and accountability measures. This has a direct impact on the corporate governance of an organization (Yulimar, et al, 2012). Article 4 Sitaru, D. (2009). Corporate governance. Lex et Scientia, ISSN 1583-039X, 10/2009, Volume 16, Issue 2, pp. 186 – 213. LexEtScientia. The aim of the paper is to establish the roles that corporate governance plays in the operations of the organization as well as its influence on the economy. Interviews with the stakeholders in various organizations was the means used by the author to collect and compile information Results The author of the article was able to establish that corporate governance plays an essential role in every organization regardless of the size. This is due to the influence that corporate governance has on the companies and the overall economic situation. Sitaru (2009) argues that a good economic situation is a result of proper corporate governance mechanisms. The corporate governance also plays an important role within the organization. The balance of power is one of the internal benefits of corporate governance. This is because it ensures that the roles of different managers within the organization are clearly defined. It basically plays an crucial role in reducing the conflicts within an organization. Corporate governance principles also ensure that the needs of all the stakeholders are addressed. This enhances the balance of powers where one party is not the final decision maker. It is beneficial to the organization and the stakeholders. The corporate governance provides room for transparency within an organization. This is due to the auditing processes that are encouraged by corporate governance. The internal auditors are usually involved in the testing of the financial control design. It ensures that the financial records are accurate and transparent. It is thus evident that corporate governance is an important tool in the management of an organization (Sitaru, 2009). Article 5 Lipman, F. (2007). Summary of major corporate governance principles and best practices. International Journal of Disclosure and Governance, ISSN 1741-3591, Volume 4, Issue 4, pp. 309 – 319. Palgrave Macmillan. The paper by Lipman (2007) aims at establishing the role of transparency and accountability in the operations of public and private companies. The methodology used to collect information for the compilation of the paper includes interviews with stakeholders in the corporate governance from the public and private sector. Results The writer establishes that corporate governance principles are important in both the public and private sector. Most public and private companies are aimed at profit making. However, the ability of the company to make the profits is determined by the corporate governance principles. According to Lipman (2007), corporate governance principles ensure that the best practices are adopted by the company in the particular industry. This is important in terms of customer satisfaction. The customers are also stakeholders according to the corporate governance frame work. On the other hand, the non-profit making organizations also require the use of corporate governance policies and framework. This is for the purpose of streamlining the operations of the organization. Integrity is one of the emphases of corporate governance. In most of the organizations, the chief executive officer and the chief accounting officer controls the financial records. Their integrity is important as it eliminates the cases of fraud. However despite the benefits of corporate governance, some challenges are usually present. The cost of monitoring the process may be high and thus hindering it. Transparency is very important in the process. However in some organizations, the financial records are not accurate due to lack of transparency (Lipman, 2007). Comparison of the results from the articles All the articles used in the literature review have some common concepts. The main concept that is evident in all the articles is that corporate governance is about transparency and accountability within the organization. Transparency and Accountability are crucial success factors for the organization. The articles also emphasizes that different stakeholders are importance for the purpose of corporate governance. The authors point out that the stakeholders have important roles to play which affect the performance of the organization. It is thus evident from all the articles that the success of an organization depends on the corporate governance strategies. Summary The success of an organization is guided by the corporate strategies and principles. Different stakeholders, both internal and external, play important roles in the corporate governance framework. The external environment can also impact negatively or positively on the corporate governance strategies. Transparency and accountability are essential concepts of corporate governance and they lead to the success of the company. They are vital in terms of reducing the conflict of interest within an organization. The main barrier to corporate governance is lack of resources to monitor the processes of the company and also the lack of transparency in the financial records of some companies. References Lipman, F. (2007). Summary of major corporate governance principles and best practices. International Journal of Disclosure and Governance, ISSN 1741-3591, Volume 4, Issue 4, pp. 309 – 319. Sitaru, D. (2009). Corporate governance. Lex et Scientia, ISSN 1583-039X, 10/2009, Volume 16, Issue 2, pp. 186 – 213. LexEtScientia. Yulimar, V. et al. (2012). Corporate Government Mechanism, Company Size, and Earnings Management. GSTF Business Review (GBR), ISSN 2010-4804, 04/2012, Volume 2, Issue 1, p. 170. Dalkilic, F. et al, (2012). CEO turnover and corporate performance relationship in pre- and post- IFRS period: evidence from Turkey. Journal of Business Economics and Management, Volume 13, Issue 3, p. 421. Stanislav, M. (2008). Corporate governance as political insurance: firm-level institutional creation in emerging markets and beyond. Socio-Economic Review, ISSN 1475-1461, Volume 6, Issue 1, pp. 69 – 98. Norman, A. (2004). Corporate governance, economic reforms, and development: The Indian experience. Journal of Economic Literature. Read More