Corporate Governance and Ethics Discussion - Essay Example

Discussion Questions (Corporate Governance & Ethics) Part A of the Subject Name of the Concerned Professor 5 January 2008 Answer 1: Rewards for businesses engaging in ethical behavior The popular Capitalistic interpretation of business is extended in terms of profits and stock prices merely. Infact such shallow notions about business severely undermine the importance and contribution of business in the social and economic life. As any other field of endeavor, businesses do require ethics and values (Ferrell, Fraedrich and Ferrell, 2008: 18). Considering the contemporary information driven world, it is next to impossible for any business to hide skeletons in its cupboard. Conscientious and well informed citizens do appreciate and prefer to invest in businesses that are run on sound ethical guidelines. Businesses subscribing to ethical behavior tend to gain tangible rewards in the sense that ethics not only portray any brand as being clean and above board, but they also streamline and organize the internal functioning of the businesses. Considering the contemporary business environment defined by a cut throat competition, ethical credentials endow businesses with sound and reliable USPs that eventually translate into an enhanced market share and big profits. Affiliation to credible ethics makes the consumers and the investors feel positive about any business and bolster its public perception as a business that is trustworthy and reliable. Respect for law, caring for environment, being punctual with customer care, being transparent and accessible are not mere pies in the sky, but are the very fundamentals that form the bedrock of any sustainable and profitable business. Market share, investor trust and brand appeal is primarily about perceptions and commitment to ethics influences the perception about any business with the consumers and the investors. Sound ethics endow any business with a strong brand appeal and investor's interest. Hence the businesses that subscribe to ethics stand to gain much in the long run. Allegiance to ethics always has a direct positive influence on the public perception, brand appeal, stock prices and market share. A dependable reputation is the ultimate reward that a business can harvest out of its ethical commitments. Answer 2: Corporate Governance Corporate governance is the overall vision that defines the direction and functioning of a corporation. The concept of corporate governance is dependent upon accountability in the sense that it lays down the respective duties and guidelines for the different human constituents of a corporation. Corporate governance elaborates the procedures and norms that are adhered to while making decisions in a corporation. Corporate governance directly influences the predominant moral order that has a direct bearing on the parameters used for assessing the final performance of a corporation and chalks out the strategies resorted to, to achieve the objectives cherished by a business. Broadly speaking corporate governance is about transparency, morality and accountability. The stakeholder approach of corporate governance is more closely aligned to the given definition. The conventional stockholder approach to corporate governance is utterly narrow in its scope. Stockholder approach to corporate governance assesses the performance of a corporation in terms of quarterly results, balance sheets, net profit and stock prices. Such an approach owes allegiance to just one entity that is the overall interest of the stockholder. The fact is that any corporation is run by humans and has a human face that is continually monitored by the society. Net profits cannot be and should not be used as the sole criteria for evaluating the performance of a corporation. The accountability in any corporation has to be defined by the ethics and the values that are sensitive to and appropriately respond to the existing social and human concerns. Ultimately the corporations are not mafia that can ignore ethics and laws in their blind quest for profits. They must exhibit an all encompassing vision that is sensitive, sound and pragmatic in its approach. Concern for the major and minor stakeholders in a corporation endows it with a much more holistic and practical vision and ensures that the activities of that corporation proceed with a comparative ease and smoothness. Ignoring the stakeholders gives way to unnecessary glitches and impediments that are not only counterproductive in the long run, but also jeopardize the public perception of any corporation. Answer 3: Conflict of Interest The term conflict of interest refers to an organizational situation where an employees pecuniary interests or personal obligations towards family, friends, associates and the like make one compromise on one's professional judgment and one's duties towards the organization in which one serves (Business Ethics, 2009). People working in the private or public institutions and organizations do have to time and again face the dilemma where their commitment to professional ethics is challenged by their financial interests and personal responsibilities and interests. Conflict of interests undeniably represents an issue that comes within the ambit of business ethics. It is the cardinal duty of any individual working in an organization to not to let one's personal interests override one's commitment and obligations to that organization. Conflicts of interests do have the potential to jeopardize the overall vision and strategy of an organization as they can make an employee ignore or flout the accepted standards of conduct and sacrosanct procedures that are regarded to be valid and ethical by that organization in particular and the society in general. Conflicts of interests are often the situations that test the ethical credentials of any employee and to a great extent determine the success and effectiveness of any organization in the long run. The procurement of the goods and the services required by an organization from the friends or family members of the individual who is directly in charge of the procurement operations in that organization definitely serves as an apt example of conflict of interest. All organizations, be it private or public, have laid down procedures for the procurement of goods and services. The employees assigned the responsibility for the procurement of the goods and the services and the firms or individuals interested in subscribing to such opportunities are required to abide by such procedures. In that context if any employee entrusted with the responsibility of managing procurement operations in an organization flouts the laid down procedures to benefit one's relatives or friends, it represents a conflict of interest situation. Answer 4: The US and the Australian Approach to Corporate Governance The United States adopted a legislative approach to corporate governance reforms with the enactment of the Sarbanes Oxley Act that certified a thorough understanding of the principles of ethics and integrity at all levels within the corporations. Such an approach removes any ambiguity pertaining to the magnitude or details of what is required to bolster the allegiance to ethical standards within the corporations. It obliterates all doubts pertaining to the synonymous interpretation and understanding of the required standards of corporate conduct and integrity. This assures a thorough benchmarking of the ethical systems existing within the business organizations and makes provision for detailed and periodical audits pertaining to the sensitive areas of integrity within the corporations. There is no denying the fact that the ethical systems supported by concrete organizational mechanisms and responsible institutions do stand a better chance of assuring a thorough compliance. The biggest lacuna in the Australian 'comply and explain' approach is that it facilitates minimal mechanisms and processes to ensure that the ethical codes are properly and thoroughly operationalized within the organizations. This gives way to mutually conflicting and utterly confusing ethical policies and procedures within the organizations that operate independently and jeopardize the integrity systems within the corporations. Such an approach denies a holistic and all encompassing perception of and response to ethical standards that can be adopted and implemented by the corporations. A dearth of institutional mechanisms and legislative provisions to support the validity of ethical standards within the corporations makes the entire integrity debate very amorphous and vague. Thus the US approach is definitely better as compared to the Australian Approach. Answer 5: Non-Executive Director A non-executive director is a person who is a part of the board of directors of a corporation, but is not a member of the executive management team employed by that corporation (Business Link, 2009). A non-executive director does not happens to be a paid employee of the corporation which he/she serves and does not owes any allegiance to that corporation by virtue of any pecuniary or personal interests. A non-executive director differs from other directors within a corporation in the sense that other directors are not only the members of the board of directors within that corporation, but also happen to be the paid employees of the corporation they serve. Thus a non-executive director has the power to furnish independent views pertaining to the conduct and performance of a corporation. An independent non-executive director does not share any administrative or managerial responsibilities within a corporation and has nothing to do with the routine operations of the corporation he/she serves. An independent non-executive director bears no allegiance to the management of a corporation and is not bound by any personal ties with any member of the management or board of directors. Still an independent non-executive director is bound by the legal obligations as other directors within a corporation. Independent non-executive directors could play a great role in ensuring good corporate governance. They can not only protect and safeguard the interests of the small investors and shareholders, but can also serve the interests of the variegated stakeholders within a corporation. Such directors can furnish an independent stand pertaining to the functioning and ethical conduct of the corporation in which they serve as they are not bound by any vested interests and are not tied to the profit motives of a corporation. Infact the independent non-executive directors represent the ethical conscience of a corporation and could make it conscious to its social responsibilities and ethical moorings. Answer 6: Ethics Virtue ethics are the principles and goals that ensure the viability of justice, coexistence and integrity in any society or organization. Virtue ethics is a way of conducting organizations that ensures that the rights or fundamental prerogatives of any stakeholder are not jeopardized in the blind quest for profits and pecuniary benefits. Virtue ethics are about truth, justice and a sustainable allocation of resources. Ethics are the human moorings that show sensitivity towards environment, law, human rights, rights of the sidelined segments of the society, allegiance to universally recognized social and economic goals. Above all virtue ethics are a way of conducting business that does not impinges upon the legally and humanly valid rights and prerogatives of any stakeholder in an organization. Virtue ethics are about ensuring such an organizational vision that does not takes an undue and illegal advantage of power and money. One virtue ethic that I possess and that has a direct bearing on my study environment is my ability to be sensitive to the variegated aspirations in a team scenario. I always try to listen to and understand the opinion and views of all the members' while working in a team scenario. This ensures a more democratic approach towards the chalking out of the overall strategy and allows for an allocation of resources that is more effective and to the liking of most of the members in a team. Thus all the members in the group get a sense of say and participation in the process of decision making. My commitment to truth is a virtue that will ensure my success in the long run. I strongly believe that it is impossible to hide or suppress the truth. Thus it is always safe and pragmatic to be on the side of the truth. Despite the fact that sometimes truth may be relative, I do believe that most of the humans do have the ability to sense the voice of truth and justice amidst chaos and confusion. At least I think so. Owing to my allegiance to this virtue ethic, time and again I have discovered that in a moment of crises, though most of the members in a team in which I operate may not agree with me, but they definitely trust in the sincerity and credibility of my viewpoint. This gains me the respect and trust of my colleagues. References 'Definition: Conflict of Interest' 2009, Business Ethics, viewed 5 Jan. 2009, http://www.businessethics.ca/definitions/conflict-of-interest.html Ferrell, OC, Fraedrich, J & Ferrell, L 2008, Business ethics: ethical decision making and cases, 7th edn, Houghton Mifflin, Boston. 'The different types of director' 2009, Business Link, viewed 5 Jan. 2009, Read More