Corporate Responsibility and Corporate Governance in Europe by Bisio - Article Example

CORPORATE GOVERNANCE (Course Instructor) (University Affiliation) (Student’s Name) Date Introduction Corporate governance refers to among other things, the rules, policies, relationships, processes and systems from which authority is exercised and maintained within an organization. The governance characteristics of an organization are shaped by a multiplicity of factors both of which are internal and external (Bisio, 2003). Corporate governance issues on the other hand refer to the issues that curtail the ability of the organization to achieve its objective of profit maximization, wealth maximization and most importantly the corporate social responsibility. With the emergence of globalization, so much information is in the public domain concerning corporate issues. The media has made it possible for the public to access this information and consequently make judgments about the products of those organizations (Bisio, 2003). This essay aims to make an argument concerning the independence of every board management. The paper will look at the governance issue in as far as the independence of the board is concerned, why the issue needs attention and finally, why the arguments on the issues have to be done in the media. An outline and the summary of the arguments made in the article. a) Independence of the board of management. The article writer is making an argument concerning the independence of every board management. The writer argues that the board should make an effort of meeting regularly with the organization’s chief executive offices and have a one on one engagement with the mid and low level managers in order to better understand the operations within the organization (Australian institute of company directors, 2016). In order to make better decisions according to the writer of the article, the board of management will need to recruit company directors who have diverse and complementary skills, experiences and backgrounds and at the same time attempt to strike a balance between experience and the tenure so that the company can always have fresh teams in place at any given time (Bogoslaw, 2016). b) Shareholder equality. The basis of the argument according to the article is to have an independent board that cannot be manipulated. The writer argues that this can only be achieved if a company’s equity holders are allowed to vote on a one share one vote basis so that equality is achieved in as far as the management of the organization is concerned (Bogoslaw, 2016). c) Emphasis on board tenure The writer argues that the principles of ensuring an independent board should be extended to the equity holders by putting in place a long term equity holders’ right to have their director nominees on the organization’s nominee proxy card other than acknowledging that a number of companies have in the recent past adopted a proxy access policy (Bogoslaw, 2016). The writer goes ahead to criticize the failure of the corporate world stakeholders to send a very strong message on the need to have a tenure policy in place so that at any given opportunity, there are fresh minds in terms of age, gender and ethnic diversity in the boardroom (Bogoslaw, 2016). d) The use of non-Gaap measures. The writer is arguing in regard to the concerns raised on the growing use of the non- Gaap numbers suggesting that it has been used to send a message to the managers of organizations that it is time that they cleaned up their books of accounts and by extension their financial reports (Bogoslaw, 2016). Discuss the corporate governance issue raised. The corporate issues raised in the article concerns the composition of the board of management. Issues have in the past been raised concerning the diversity of the boards of management in terms of age, gender, and ethnic diversity (Bisio, 2003). These concerns have also touched on the need to check the tenure of the board members so that the organization can have periodical overhauls in its board of management in order to have a new team in place. There have been issues raised on the independence of the board chairmen for instance. There have been constant calls from the shareholder activists and other policy groups for the position of the company chief executive director and that of the chairman of the board of directors and the issue has been a major topic of discussion (Bogoslaw, 2016). One of the organizations that have been promoting the cause of having an independent board chairman is the Chairmen’s Forum, a group that is associated with the Yale school of management that is made up of formers as well as the current chairmen of the North American companies (Bogoslaw, 2016). The forum’s major objective is to aim for the separation of independent chairmen roles and those of the chief executive officer so that one person does not have to play the same roles (Australian institute of company directors, 2016). It went ahead to request New York securities market to ensure that the management of all the listed corporations have the roles of the board chairmen and those of the chief executive officers are separated so that the independence of the two are effectively separated (Bogoslaw, 2016). The separation of the board chairman and chief executive officer positions is not an entirely new issue in corporate management as it has been on the corporate management list of things to get for a long time. Practically all organizations in the United Kingdom and Canada isolate the roles of the board chairman from the chief executive officer part (Bogoslaw, 2016). That said, minor partition of the parts does not recount the full story of board initiative. One similar investigation in the United States and United Kingdom uncovered an extensive variety of conceivable duties and exercises under a director's domain (OECD , 2011). The real roles played by the autonomous chief executive directors practically speaking might be controlled by the board's system, the organization's history, the identities and management styles of the people included, and different variables, the whole of which may figure out if the division of the parts is best and alluring at any given organization (Bogoslaw, 2016). The management structure itself is not almost as vital as whether it works practically speaking. Board diversity For a company’s board of management to be deemed viable a board needs the right combination of individuals, with a proper blend of aptitudes, knowledge and experience that fits with the management's destinations and vital objectives (Australian institute of company directors, 2016). That ought to be considered not just when new appointments are being thought about or made, better yet with regards to normal board assessments (Bogoslaw, 2016). Boards of management which have a proper and diversity of abilities and experience will be less likely to engage in group discussions and they will be better prepared to show esteem and react to difficulties that may emerge. This is prone to change from management to management (Bogoslaw, 2016). A few appointments of new aptitudes and experience may include minimal incremental advantage; others might be of extraordinary worth. Boards of management ought to painstakingly consider what frame and level of assorted qualities is suitable for their management's circumstances (OECD , 2011). What is clear is that boards of management ought to amass a group of executives that together involve a scope of aptitudes and experience that will best help the management accomplishing its objectives. In doing this there needs to be consideration given to the previous level of differing qualities that may be suitable for a management's circumstances (Australian institute of company directors, 2016). There is in most cases a sensitive balance needed when making board composition between searching for people who will bring debates and discussions that will add value to the organization, yet at the same time, without losing the essential board members bond or union to deal with the basic decision making. The lack of a proper approach to the decision making mechanism could lead to a dysfunction in the outcome including a paralysis in the decision making process. For this reason, it is important to note that personal; qualities and skills are the most important considerations (OECD , 2011). The equality of the shareholders Equality of the shareholders can enhance by the principle of one share one vote. The principle ideally gives an opportunity to the largest shareholders to make the most critical decisions where their interests will be catered for (OECD , 2011). There has been an issue of proxy access also since the issue at hand is to make sure that each and every opportunity is taken to make sure that the composition of the board of directories is fairly a reflection of the aspirations of the shareholders. To achieve this, there is a need to streamline the voting patterns to allow for those who have more interests to have more voting rights than those who have less. In this way, it will be difficult for an individual or a group of people to impose upon a board of management and consequently the board chairperson who is going to make decisions in a manner that is contrary to the wishes of the stakeholders (OECD , 2011). Why are these arguments made in the media? The issue of board composition and more so, the independence of the board of management is nothing new in the corporate field. In fact, it has been in the public domain for a very long time. The issue definitely needs attention in order to have a fruitful discussion from the stakeholders on the need to streamline the corporate governance (Bogoslaw, 2016). The media is the platform where the opinion makers get an opportunity to air their views and gives an opportunity to the consumers of the information to have an opportunity to read their minds. The reason for having the argument on corporate governance in the media therefore is strategic in that it gives the stakeholders an opportunity to have a discussion on the topic of study (Katz and Wachtell, 2012). The media is a tool of communication where the works of a single writer are read by millions of people across the world. This way, they can give their views on the subject matter and eventually influence the decisions of the decision makers. This goes further to explain the decision of a number of companies to train the members of the fourth estate on corporate governance. This act is meant to equip the media with the necessary skills on the corporate governance, reason being that the media being the transmitter of information to the members of the public needs to have the necessary information on the same (Katz and Wachtell, 2012). Conclusion A company’s board needs to have the right combination of individuals with the required background, experience and the skills and how their addition to the board of directors will add some value to the performance of the organization. There have been concerns have also touching on the need to check the tenure of the board members so that the organization can have periodical changes in its board of management in order to have a new team in place. Issues relating to the independence of the chairman of the board of directors have also been raised with many of the arguments being the concern on the boards to make decisions independently. There has been an issue of proxy access being an issue (Katz and Wachtell, 2012). This is because the issue at hand is to make sure that each and every opportunity is taken to make sure that the composition of the board of directories is fairly a reflection of the aspirations of the shareholders. To achieve this, there is a need to streamline the voting patterns to allow for those who have more interests to have more voting rights than those who have less There have been constant calls from the shareholder activists and other policy groups for the position of the company chief executive director and that of the chairman of the board of directors and the issue has been a major topic of discussion. Bibliography Australian institute of company directors 2016, Principle 2: Board composition. Retrieved 28th August 2016 from http://www.companydirectors.com.au/director-resource-centre/not-for-profit/good-governance-principles-and-guidance-for-nfp-organisations/principle-2-board-composition Bisio, L 2003, ‘Corporate responsibility and corporate governance in Europe’, Symphonya. Emerging Issues in Management, (1). doi: 10.4468/2003.1.09bisio. Bogoslaw, D 2016,  Board independence and diversity stressed in new governance principles. Retrieved 28th August 2016 from https://www.irmagazine.com/articles/corporate-governance/21545/board-independence-and-diversity-stressed-new-governance-principles/ (Accessed: 27 August 2016). Katz, D.A. and Wachtell 2012,  Analyzing aspects of board composition. Retrieved 28th August 2016 from https://corpgov.law.harvard.edu/2012/02/20/analyzing-aspects-of-board-composition/ Nordberg, D 2010, Corporate governance: Principles and issues, Los Angeles, SAGE Publications. OECD 2000, The board of directors: Composition, structure, duties and powers company law reform in OECD countries A comparative outlook of current trends. Retrieved 28th August 2016 from https://www.oecd.org/daf/ca/corporategovernanceprinciples/1857291.pdf OECD 2011, Chapter 6. Corporate governance introductory note. Retrieved 28th August 2016 from http://www.oecd.org/investment/toolkit/policyareas/corporategovernance/44931152.pdf Appendix https://www.irmagazine.com/articles/corporate-governance/21545/board-independence-and-diversity-stressed-new-governance-principles/ Read More