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03/20/2012

Case Study Corporate Governance & Business Ethics


Case Study Corporate Governance

 

Introduction

            Organisations face some issues and problems which should be given attention to avoid major downturn. Accordingly, corporate and organisational issues can lead to the inability of the management to adhere to corporate governance and ethics.  Corporate governance is regarded as the investigation of the control of an industry as used by the management and directors. In line with this framework, the management of organisation are held accountable for their action by their stakeholders.

On one hand, authorities of the shareholders to affect the behaviour of the industry directors or management are restricted in practice and are rarely used. Such give the management the considerable authorities and power to take action if it fits. In addition, this also seems to be relatively different from those in the public governance in which the action of the directors are slightly restrained by specific actions of the people that it handles (Gordon, 2002).  In every action, people from the organization have the responsibility and accountability for such action.

            Primarily, the goal of this paper is to analyze two cases studies with regards to its issues affecting their adherence to business ethics and corporate governance.

Overview of the Cases

            The first case was about the catastrophe that happened in the plant of BP in Texas which killed more than 10 people and wounded the others.  In the report provided, it shows that the management of BP has been blamed for such tragedy. Herein, the report also showed that the top management should be blamed because of their inability to secure safety of the people in the plant.  

            On the other hand, the second case was about the clash of the directors and management of M&S in which they are not in favor in letting Stuart to have dual role in the company because many found him incompetent to do his job.  In addition, the case also mentioned about other issues leading the shareholders not to believe in the capabilities of Stuart Rose to be the new executive chairman.

Alternatives

The context of corporate governance has been able to indicate the goodness in the non-moral and also the moral sense. Accordingly, the non-moral practice involves the effective decision making, efficient allocation of resources strategic planning and others (Monks & Minow, 2001). Nevertheless, in its sense of morally good corporate ethics and governance has come to be noted as promoting any ethical environment which is morally correct in itself or inevitably correct in terms of ethical behaviour in business is reflected in desirable commercial results (Francis, 2000). Hence, the links here are due to the duties of the directors and management, diligence as well as the entire strengthening of corporate social responsibilities.

It can be said that the management should be able to show set of accurate instances of good intention as well as provide for their subordinates the clear and apparent information which is to do as the leaders’ do and say what the leaders’ say (Francis, 2000). In this regard, those in the middle to lower management are having difficulties to be more ethical when it seems that the top management in the corporate have no or less commitment. Such information, the message or the information should be sincere and no account of deception should foster the perceptions that a board is ethical when more can see that it’s unethical.

In addition, the commitment to the business ethics and the corporate standards by the management will improve the prospects of having ethical infrastructure and structure in the firm. Herein, such structure is considered as the materialisation of the commitment, a ways of avoiding as well as resolving ethical issues as well as an impressive expression of sincerity.

Since the case studies provided have mentioned the issues and problems faced by BP and M&S that leads to corporate governance issues, it is essential to provide alternative models that would help the management provide efficient resolutions for the given problems.  Based on the given case studies, the following alternative is being presented.

Table 1

Alternative Model A and B

Organisation

Alternative Model A

Alternative Model B

BP

 

 

  • Consider reforms on Occupational Health and Safety standards of the company.
  • Provide more rigorous orientation and training for employees who handle hazardous works in the company.

M&S

 

 

 

 

 

  • Address the needs of the shareholders in adhering to the standards of corporate governance in choosing or appointing a leader.
  • Provide resolutions in terms of appointing or choosing leaders to avoid shareholders clash and issues in the future.

BP and M&S

 

 

 

 

 

  • Consider organisational changes that will allow the top management to identify what is working and not in line with the corporate governance of the organisation.
  • Carry out corporate analysis and consider reviews for corporate governance approach and business ethics to provide safe workplace and to allow harmonious relationships in the company.

 

Analysis

Companies should ensure that they always have the best business approaches and that they adhere to business ethics and corporate governance. Nonetheless, there are various issues which concern how the management should act to adhere to the combine codes of ethics and corporate governance.  Accordingly, in a given culture in a period of time, there is a broad arrangement in terms of major value. According to Stoner and Wankel (1987) not all individuals hold the same values; however, majority will influence the beliefs as well as the behaviours of the people in the society.  It can be said that the public awareness of ethics in unethical as well as ethical behaviour in the organisations have increased in recent periods. Part of such increase is given emphasis on the corporate ethics which can be attributed to the continued tension in the business environment. Such conflicts has often resulted in further issues and for enhanced deterrence and regulations for the business environment (Sims, 1994).

            Both companies are facing issues with regards to corporate governance. In the case of BP they are having problems on identifying that will be responsible for the tragedy that happened within their industry which leads casualties, while in the case of M&S, they are having problems on accepting the decisions of the management, specifically for shareholders, with regards to the appointment of Stuart Rose as the new executive Chairman. Different issues that leads to a common resolution, that is, to ensure that corporate governance are being used efficiently and adhered onto.

The emergence of the corporate governance systems with the diver groups for both BP and M&S reflect the growing complexities in the management of the industries  that needed the efficient use of valuable resources such as their human resources, who were highly affected in both cases.  In this regard, both industries should comply with the corporate governance systems, specifically with the growing conflict of the management of M&S in their acceptance and approval for the appointment of Stuart Rose and the conflict on who will take charge of the blame for BP for the incident that happened twice.  IN addition, corporate governance is very essential as it will help the organisations involved in this case to identify the most efficient approach to coordinate the issue through the application of analytical approaches derived from different studies and cases (Jobber, 1998).

Accordingly, with the process of managing the issue  can be solved in various ways depending on the needs of the company.  Herein, the management can have the aspect of considering course of actions in line with their problems and specific objectives set. More often than not, the consideration of business ethics as well as corporate governance systems can be used for complex and complicated issues such as the issues mentioned in the cases for this report.

            In both cases, it can be said that in line with the Kantian Theory, the management should first have good intention which is based on the moral law rather than considering practical law to ensure that the decisions will be advantageous to the entire company (Chaganti & Sherman, 1998). For instance, in the case of BP, the alternatives provided include reforms on Occupational Health and Safety standards of the company and provide more rigorous orientation and training for employees who handle hazardous works in the company. In these alternatives, both have moral intentions but it can be noted that considering occupational health and safety standards as part of the corporate governance of BP can lead to the prevention of tragedies in the future.

On one hand, in the case of the M&S, it can be said that the alternative provided both have moral intentions but it seems that the management will provide more advantage if they are able to address the needs of the shareholders (Sarkar & Sarkar, 2000). in adhering to the  standards of corporate governance in choosing or appointing a leaders. Lastly, it is more advantageous if both the management of BP and M&S should carry out corporate analysis and consider reviews for corporate governance approach and business ethics to provide safe workplace and to allow harmonious relationships in the company.

According to the Kantian theory, the good intentions or deeds that contributes to the anticipation of harmonious relationships is a good sign of adherence to business ethics and corporate governance. Such means that the intent to work out the issues with the people involved is better considering that the management would do anything to secure their intentions. Moreover, it can be said that the alternative chosen will be able to provide benefits for the entire corporation and the society as well.

It can be added that both companies should have a clear code of ethics and all the personnel must be able to affirm that such ethical codes are accepted.  In both cases, this can work since it considers conflict of interest policies to make sure that the key and vital corporate decisions for BP and M&S who do not have relative interest in the result separate from their interests as a company figure. In this regard, the management should actively and efficiently monitor the compliance of these individuals with the law as well as the global financial policies and also practices over crucial aspects.

Conclusion 

Accordingly, decision making for solving the issues within the company is a cognitive approach which the management can choose. It is important that the management who will decide which alternative to choose are bounded with ethical conducts and knowledge as well as well informed with regards to the context of corporate governance.  Normally, corporations give emphasis on the external features of the business environment. On one hand, top management typically give emphasis on their aggressive competitors not giving importance on the internal needs of the corporation.  Accordingly, both cases are said to have major conflicts which should be given keen attention to avoid more problems in the future. It can be said that BP’s actions and inactions with regards to the tragedy should always focus on considering the benefits of the employees who are highly affected by the tragedy and the assurance that such tragedy will not happen again. In the case of M&S, the management is faced with management issues since most shareholders are not accepting what the company wants to implement, specifically the appointment of their new leader.

            Accordingly, corporate governance is one of the essential aspects of economics which enables the examination of motivating and securing efficient management systems in the industries, like BP and M&S in this case.  BP’s issues are related with the inability of the management to provide safety measures to avoid tragedies while M&S is facing the issue in terms of shareholders’ clash and legislations. In this regard, the objective of the context of corporate governance highly emphasized the enhancement of the performance of the company. In this regard, it can be said that in order to solve the issues for both industries, the management should always consider their corporate social responsibilities and their moral intentions to the public as well as their shareholders and employees.

Reference

Chaganti, R. and Sherman, H. (1998). Corporate Governance and the Timeliness of Change: Reorientation in 100 American Firms. Westport, CT: Quorum Books.

Gordon, J. (2002, January). The Macroeconomic Benefits of Good Corporate Governance. Available at: http://www.imf.org/ Accessed: January 15, 2010.

Grönroos, C. 1994, From Marketing Mix to Relationship Marketing: Towards a Paradigm Shift in Marketing, Management Decision, 32 (2),

Jobber, D. 1998, Principles and Practice of Marketing (2nd ed.). London: McGraw-Hill Publishing.

Sarkar, J. and Sarkar, S. (2000). Large shareholder activism in corporate governance in developing countries: evidence from India. International Review of Finance, 1(3), 161–194.

 

 

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