Corporate Governance frameworks Essay Example | Topics and Well Written Essays - 1000 words

Corporate Governance frameworks - Essay Example Summary and conclusions Page 10 7. References 1. Introduction Corporate governance is vitally important to the economic well being of a modern capitalist economy. In complex organisations with variety of interested parties and many potential conflicts of interest, corporate governance can inform these parties about the organisation’s activities and also protects stakeholder’s rights through monitoring and control. This report aims to critically compare the UK and US systems of corporate governance, where this term is more narrowly defined as relating to the accountability of decision makers, and excludes from consideration the role of corporate governance in increasing organisational efficiency. The report is structured in to six sections. The first section, this introduction, explains the purpose of the report and gives a broad outline of the way the argument will be constructed, as well as what bases of evidence it will draw from. The second section gives an overview of the generic role of corporate governance, its history and development, as well as explaining why it is necessary. The third section will describe the different approaches to corporate governance in the United Kingdom and the United States respectively. ... The UK and US responses to such scandals will be contrasted and the relative advantages and disadvantages of their systems of corporate governance will be discussed.the The sixth and final section will summarise the arguments made and outline the major conclusions resulting from the analysis. 2. The aims of corporate governance Although, various definitions of corporate governance exist, this report will take the following as its working definition (Sir Adrian Cadbury (2000) in 'Global Corporate Governance Forum', World Bank), because it effectively highlights the key issues that the following analysis will address: "Corporate Governance is concerned with holding the balance between economic and social goals and between individual and communal goals. The corporate governance framework is there to encourage the efficient use of resources and equally to require accountability for the stewardship of those resources." This neatly summarises the reason for the institution of corporate gov ernance. Modern businesses have a variety of stakeholders whose interests may conflict; however, it is the case thatthe control of the organisation is skewed heavily towards a single subset of this group, the managers. Therefore, a system of checks and balances is required to safeguard the rights of all stakeholders. Corporate governance can be viewed either through the ‘lens’ of Principal-Agent Theory, or Stakeholder Theory. Principal-Agent Theory is in the tradition of economic studies of asymmetric information (Mirrlees, 1975) and theories of the firm (Gibbons, 2005) and provides a focused analysis by distilling the problem down to the basic separation of ownership and control – that shareholders own the

Arthur Andersen LLP Case Study Example | Topics and Well Written Essays - 1250 words

Arthur Andersen LLP - Case Study Example Strategic changes that occurred in the organization’s life include development of a reputable character that established it in the accounting and auditing market. Later changes that suggest unethical practices such as collaboration with Enron’s accountants however transformed Andersen to its downturn and collapse. Application of soft strategies is another change that occurred in the organization’s life. Conflict between departments into integration also identifies strategic change in the company’s environment. Organizational changes that Andersen realized are change from a centralized management to a disintegrated organization with independent managerial authority at branch level. Administrative policies for higher profits and lower costs are another organizational change in the organization and identified punitive reward and punitive measures depending on an employee’s level of success. Expansion to new areas of specialization and a shift form ethical values are other organizational changes that are evident from the organization’s life. Evaluation of Andersen’s claim that their problems on the Enron audit were due to a few bad partners Anderson’s claim that its problems were caused by a few bad partners is not valid. This is because the problem was a culmination of bad decisions that failed to resolve the organization’s problems such as need to maximize profits. The decision to set high targets for employees and punish in case of failure to meet the target is an example of causes of the problem because it forced the employees to explore all possible alternatives to avoiding the punishments. Integrating Enron’s accounting personnel into the organization is another indicator the management was aware of the practices at Enron because it never reacted. Duncan’s decision to move Enron’s $ 30 million ao a $ 50 million account is another indicator that Anderson was aware of a malicious practice because it took no action against the bad decision. If the problem had been a few individual then the organization could have been moved to correct malpractices before the final fall. 3. Possible actions as the Andersen’s managing partner in the early 1990s If I were a managing partner at the time, I would have preferred a different strategy. I would have explored a branding strategy towards retaining the organization’s existing clients and for attracting more clients. Developing on the already popular brand of quality services that are based on integrity would be my basis. Increased number of clients towards higher cumulative profit margins, even at lower margins, would then help the organization into a more competitive competition. This would at the same time care for employee’s interest in their income and job security and maintain an ethical culture. 4. Relationship between what happened at Andersen