CORPORATE GOVERNANCE AND SOCIAL RESPONSIBILITIES

(Written Report)

Governance?
Governance means that a manner of governing or controlling.
Corporation
A Corporation is composed of five to ten Incorporators. Most business enterprises
that employ more than a few dozen people are organized as corporations. The
overall purpose of corporation is to maximize the long term return to the owners
(shareholders).A corporation is a mechanism established to allow different parties
to contribute capital, expertise and labour for their mutual benefit.
The investor/shareholders participates in the profits of the enterprise without taking
responsibility of the operations.
Corporate Governance
Corporate Governance is the system of rules, practices and processes by which a
company is directed and controlled.
The term corporate governance refers to the relationship among various
participants in determining the direction and performance of the corporations.
The primary participants are:
o Shareholders
o The Management
o Board of Directors
Relationship of the participants
Management is headed by a (CEO) Chief Executive Officer, they are the in
charge in implementing the set objectives and policy of the organization, the Board
of Directors are the people who created the things to be implemented and the
shareholders are the people who voted the set of Board of Directors for the
company.
Responsibilities of the Board of Directors
These are:
1. Setting corporate strategy, overall direction, mission or vision
-The BOD are the people who sets the overall direction, mission and vision,
and the strategy of the organization that will be implemented by the
management.
2. Hiring and firing the CEO and top management
-BOD has the power to vote and to eliminate the Chief Executive Officer
3. Controlling, monitoring or supervising top management
-They are in charge for the overall controls of the organization.
4. Reviewing and approving the use of resources
-All the resources of the business that will be use or disposed should have an
approval of the BOD.
5. Caring for shareholders interests.
-Of course the BOD should maintain the good performance of the business so
that the interests of the shareholders will be protected and preserved.

ROLE OF THE BOARD IN THE STRATEGIC MANAGEMENT

Monitor acting through its committees, a board can keep abreast of developments
inside and outside the corporation, bringing to managements attention
developments it might have overlooked. A board should at least carry out this task.
Evaluate and Influence A board can examine managements proposals, decisions,
and actions, agree or disagree with them, gives advice, offer suggestions, and outline
alternatives. Active board performs this task in addition to be monitoring one.
Initiate and determine A board can delineate a corporations mission and specify
strategic options to its management. Only the most active boards take on this task
in addition to the two previous ones.
MEMBERS OF THE BOARD OF DIRECTORS
The board of most publicly owned corporations are composed of both inside and
outside directors.
INSIDE DIRECTORS are typically officers or executives employed by the
corporation.
-They are the people impart of the directors inside the organization, they
could be
OUTSIDE DIRECTORS may be executives of other firms but are not employees of
the boards corporation.
-They are part of the BOD but not internally part of the organization or the
firm.
TRENDS IN CORPORATE GOVERNANCE
Boards are getting more involved not only in reviewing and evaluating
company strategy but also in shaping it.
Institutional investors, such as pension funds, mutual funds, and insurance
companies, are becoming active on boards and are putting increasing
pressure on top management to improve corporate performance.
Shareholders are demanding that directors and top managers own more than
token amounts of stock in the corporation. Stock is increasingly being used as
part of a directors compensation.
Non-affiliated outside directors are increasing their numbers and power in
publicly held corporations as CEOs loosen their grips on boards. Outside
members are taking charge of annual CEO evaluation.
Boards are getting smaller, not only because of the reduction in the number
of insiders but also because boards desire new directors to have specialized
knowledge and expertise instead of general experience.
THE ROLE OF THE MANAGEMENT
The top management function is usually conducted by the CEO of the
corporation in coordination with the COO or President, Executive Vice President,
and Vice Presidents of divisions and functional areas. Even though strategic
management involves everyone in the organization, the board of directors holds top
management that is primarily responsible for the strategic management of the firm.
-The Management role in the business is central but for the overall,
Management operates through the functions such as planning, organizing, staffing,
leading/directing, controlling/monitoring, and motivation.
RESPONSIBILITIES OF THE TOP MANAGEMENT
Top management responsibilities, especially those of the CEO, involved getting
things accomplished through and with others in order to meet the corporate
objectives. Top managements job is thus multidimensional and is oriented toward
the welfare of the total organization.
EXECUTIVE LEADERSHIP AND STRATEGIC VISION
Executive leadership is the directing of activities toward the accomplished of
corporate objectives. Executive leadership is important because it sets the tone for
the entire corporation.
-This is the ability of the capability of the people who manages the
organization to control, direct, influence, and guide the employees.
Strategic Vision is a description of what the company is capable of becoming. It is
often communicated in the mission statement. People in an organization want to
have a sense of mission, but only top management is in the position to specify and
communicate this strategic vision to the general workforce.
-These are the future planning to achieve the entire objective and business of
the organization.
3 KEY CHARACTERISTICS OF THE CEO
1. The CEO articulates a strategic vision for the corporation. the CEO envisions
the company not as it currently is, but as it can become.
2. The CEO presents a role for others to identify with and to follow. the leader
sets an example in terms of behaviour.
3. The CEO communicates high performance standards and also shows
confidence in the follower abilities to meet these standards. No leader ever
improved performance by setting easily attainable goals that provided no
challenge.

STRATEGIC PLANNING STAFF RESPONSIBILITIES

-Strategic planning staff are the 75% of the people in the organization that
composed of 23% in charge for strategic planning and important decisions and 52%
from the small senior group that makes small decisions for the business.
1. Identify and analyse companywide strategic issues and suggest corporate
strategic alternatives to top management.
2. Work as facilitators with business units to guide them through the strategic
planning process.

SOCIAL RESPONSIBILITY OF STRATEGIC DECISION MAKERS

The concept of social responsibility proposes that a private corporation has
responsibilities to society that extend beyond making a profit. Strategic decisions
often affect more than just the corporations.
-Social responsibility is an ethical guide that suggests for an entity to be
obliged to act for the benefit of the society, it is a responsibility of everyone so that
the economic condition and the society and environment would be balance.
RESPONSIBILITIES OF A BUSINESS FIRM
What are the responsibilities of a business firm, and how many of them must be
fulfilled?
Milton Friedman and Archie Carroll offer two contrasting views of the
responsibilities of business firms to society.
FRIEDMANS TRADITIONAL VIEW OF BUSINESS RESPONSIBILITY
Friedman referred to the social responsibility of business as a fundamentally
subversive doctrine and stated that:
There is one and only one social responsibility of business to use its
resources and engage in activities designed to increase its profits so long as it stays
within the rules of the game, which is to say, engages in open and free competition
without deception or fraud.
CARROLLSS 4 RESPONSIBILITIES OF BUSINESS
1. Economic responsibilities of business organizations management are to
produce goods and services of value to society so that the firm can repay its
creditors and shareholders.
2. Legal responsibilities - are governments laws that management is expected to
obey. For example, U.S. business firms are required to hire and promote
people based on their credentials rather than to discriminate based on non-
job-related characteristics such as race, gender, or religion.
3. Ethical Responsibilities of an organizations management are to follow the
generally held beliefs about behavior in a society. For example, society
generally expects firms to work with the employees and the community in
planning for layoffs, even though no law may require this. The affected people
can get very upset if an organizations management fails to act according to
generally prevailing ethical values.
 4. Discretionary responsibilities are the purely voluntary obligations a
corporation assumes. Examples are philanthropic contributions, training the
hard core unemployed and providing for day care centers. The difference
between ethical and discretionary responsibilities is that few people expect
an organization to fulfill discretionary responsibilities whereas many expect
an organization to fulfill ethical ones.

CORPORATE STAKEHOLDERS
(ICE INVESTORS, CONSUMERS/CUSTOMERS, EMPLOYEES)
The concept that business must be socially responsible sounds appealing until we
ask, Responsible to whom?
A corporations task environment includes a large number of groups with interest in
a business organizations activities. These groups are referred to as corporate
stakeholders because they affect or are affected by the achievement of the firms
objectives.
BUSINESS ETHICS
Business ethics (also known as corporate ethics) is a form of applied ethics or
professional ethics that examines ethical principles and moral or ethical problems
that arise in a business environment. It applies to all aspects of business conduct and
is relevant to the conduct of individuals and entire organizations.
Some people joke that there is no such thing as business ethics they call it an
oxymoron a concept that combines opposite or contradictory ideas.
-Businesses will do a lots of activities for the profit and in able for them to be
successful in the competition, regardless if it itll be ethical for the competitors, as
long as it is ethical for them.
MORAL RELATIVISM
Some people justify their seemingly unethical position by arguing that there is no
one absolute code of ethics and that morality is relative. Simply out, moral relativism
claims that morality is relative to some personal, social or cultural standard and that
there is no method for deciding whether one decision is better than another.
KOHLBERGS 3 LEVELS OF MORAL DEVELOPMENT
1. The pre-conventional level is characterized by a concern for self. Small
children and others who have not progressed beyond this stage evaluate
behaviors on the basis of personal interest avoiding punishment or quit pro
quo.
2. The conventional level is characterized by considerations of societys laws
and norms. Actions are justified by an external code of conduct.
3. The principled level is characterized by a persons adherence to an internal
moral code. The individual at this level looks beyond norms or laws to find.
CODE OF ETHICS
Code of ethics specify how an organization expects its employees to behave while
on the job. Developing code of ethics can be a useful way to promote ethical
behavior, especially for people who are operating at Kolhbergs conventional level
of moral development.

GUIDELINES FOR ETHICAL BEHAVIOUR

Ethics is defined as the consensually accepted standards of behavior for an
occupation, a trade or a profession. Morality, in contrast is the precepts of personal
behavior that are based on religious or philosophical grounds. Law refers to formal
codes that permit or forbid certain behavior and may or may not enforce ethics or
morality.
1. Utilitarian approach this approach proposes that actions and plans should
be judged by their consequences. Utility does it optimize the satisfaction of
all stakeholders?
2. Individual rights approach this approach proposes that human beings have
certain fundamental rights that should be respected in all decisions. Rights
does it respect the rights of the individuals involved?
3. Justice approach this approach proposes that decision makers be equitable,
fair and impartial in the distribution of costs and benefits to individuals and
groups. Justice is it consistent with the canons of justice?