Discuss The Corporate Governace Of Next PLC (Essay Sample)

NEXT PLC CORPORATE GOVERNANCE
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According to Cadbury Committee of 1992, Corporate governance is the system that helps companies to direct and control their core operations. In a bid to explain the best corporate governance practice of a firm, it is bets to use the many theories which have been advanced on corporate governance. For example, the shareholder theory and enlightened shareholder value theory explain the best practice that a company should adopt (Council, A.C.G., 2007). But due to the dynamism of business environment, firms has to base their operation on governance code using a mix of theories. Typically, the business code is a strategic and dynamic document that best describe what practices the company will engage in with its employees, customers, suppliers, and community. Therefore, the code can only serve it purpose with modifications to meet the changes over time of the local and global circumstances (Thompson, and Wright, 1995). Besides, for the changes to have a fair representation of everyone, all stakeholders of the firm have to be consulted and involved in a transparent and open fashion into business operations (Council, A.C.G., 2007). Besides, there has to be room for comments and feedbacks from the stakeholders. In a bid to explain corporate governance best practice, the paper will discuss the corporate governance code of practice of Next plc using shareholders’ theory and enlightened shareholder value theory on corporate governance. Next plc complies with the International Labour Organization Code.
Based on shareholder’s theory, businesses have the responsibility of taking care of all the stakeholders including the shareholders. Primarily, shareholder’s argument was anchored on the premise that shareholder’s value is at the core of business operation (Freeman, Wicks, and Parmar, 2004). In other words, the company’s core responsibility is to increase profit and improve shareholders’ wealth. For this reasons, management focused on profit at the expense of other critical aspects of the business. But due to changes witnessed in the global business arena such need for corporate social responsibility, business have taken a drastic shift concerning their corporate governance practices (Turban, and Greening, 1997). Today, companies have realized that there are many disadvantages of only focusing on shareholders’ interest. For example, theory led firms to have short term strategy and take significant risks to increase profits. Due to the realisation, therefore, new companies have embraced the definition of the shareholder as any person or group of individuals who affect and are affected by the business operation (Davies, and Schlitzer, 2008). According to this definition, the shareholders include employees, suppliers, customers, creditors, competitors, community and the business owners (Thompson, and Wright, 1995). From the preceding discussion on shareholder’s theory, it is clear that business interest has moved to a focus on business corporate social responsibility as an element of shareholders approach. In fact, due to the incorporation of corporate social responsibility in the long-term objectives of the firm, corporations have recognized that they have responsibilities in economic, legal, ethical, and philanthropic terms of the business operations.
Concerning the shareholder’s theory, Next plc has its code of practice aligned to the Ethical Trading Initiative (ETI) Base Code. Next plc is focused on ethical practice towards its stakeholders and views them as part and parcel of the core processes. For widening the scope of the code to all interested parties, Next Limited developed a system that has nine fundamental principles that upholds human dignity and human right while facilitating the primary goal of maximizing the company’s profit and relation with all stakeholders. The principles include no forced labor, employment security to workers, offer legal working hours that do not exceed 48 hours a week, safe and healthy working environment, freedom of association and the right to collective bargaining to customers and suppliers, and no child labour (Nextplc.co.uk, 2017). These principles commit to the UN Guidelines on Business Human Rights that requires firms to respect all people with dignity and respect. As a matter of fact, the UN guiding principle requires companies to have the responsibility of protecting human rights through the implementation of elaborate standards. The regulation should recognize, prevent and uphold human rights through its operations. In compliance with the UN rule, Next plc is not only committed to increasing its profits but also to treat every stakeholder within and outside the business with dignity as seen in its nine principles. For example, the Next company code is a long term standard that continuously aims at improving the delivery of high standards of services and goods (Nextplc.co.uk, 2017). The quality services and products meet the expectations of its customer, suppliers, employees, and other stakeholders which in turn increase its profitability through high sales. Besides, the Next plc code supports the Universal Declaration of Human Rights and the fundamental labour principle by incorporating suppliers to its operation (Hendry, 2001). For example, Next plc has allowed its suppliers to take responsibility for their supply chain and activities (Nextplc.co.uk, 2017). Therefore, the suppliers are in charge of delivery of stocks that meet the international quality and safety standards. By implication, the involvement of vendors in business operation ensures quality goods are produced at the right time for the right market hence an increase of the sales revenue (Smith, 2003). In effect, the increased revenue, in turn, increases the shareholders’ value. The incorporation of suppliers to business operation also goes a long way in creating a healthy relationship between the firm and its suppliers (Keay, 2007). The good relationship is good for the business posterity and sustenance of its competitive advantage.
Another theory that can best explain Next code of practice enlightened shareholder value. According to the theory, firms should generate wealth to shareholders with a long-term focus on developing a healthy relationship with other stakeholders (Harper Ho, 2010). The theory explains that for posterity, a business must take care of those involved in the business operation (Admin, 2017). Such entities include customers, suppliers, community, and employees. In line with the enlightened shareholder value, Next plc has ensured that their workers are comfortable (Nextplc.co.uk, 2017). The company has created safe and healthy working condition to motivate their employees and improve their lives. Besides, the firm has fair wages and benefits. The real wages ensure that the human rights of giving employment security. The working hours are also lawful (Nextplc.co.uk, 2017). All these practices give the workers a better sense of responsibility. Ideally, employees are critical to the success of the company. When the employees are satisfied with their work, hey go out of their ways to provide quality service to the customers, to suppliers, and management (Jackson, 2011). The effect of the satisfied customers is that their morale will be high to improve the quantities of goods. Further the company can realize increase profit margins. To comply with the Universal labour laws, Next plc practices do not protect employee children (Nextplc.co.uk, 2017). Since the UN prohibits child labour, by not allowing minor workers to their firm, Next firmly complies with the law.
Moreover, next practice no discrimination to all staff. The employees whether direct or indirect to Next are treated equally with a recognition of cultural differences. For ensuring adherence to the practice code, all suppliers have to employ workers with skills regardless of their gender, race, colour, language, ethnicity, and nationality (Nextplc.co.uk, 2017). The employees who are employed on a fair platform, embrace the firm’s policy and promotes the universal human rights of equitable treatment and offer to employment. The stakeholders must also see the workers beyond their social origin, religious beliefs, marital status, age, political affiliations, and disability (Nextplc.co.uk, 2017). Ideally, without discriminatory aspects in the firm, business is poised to hire qualified personnel who can do a good job to increase the company’s profit. The practice goes against the conventional practice where companies focused on maximizing their profits at the expense of its workers and customer (Keay, 2012). Another practice is the official working hours that do not exceed forty-eight hours per week. The code makes the firm to offer sensible laws that offer highest protection to its stakeholders were overtime is voluntary for a maximum of twelve hours on a weekly basis (Nextplc.co.uk, 2017). Supplier and employees who work overtime should be paid according to the market rate of the manufacturing country. Even more, Next plc allows for freedom of expression and the right to collective bargaining (Nextplc.co.uk, 2017). Next, recognizes and respects their employees will organise and join trade unions of their choice and have collective bargaining groups.
However, Next still needs to go overboard in its corporate governance practice. The company should as well focus on the local community. For example, the company should sponsor some activities in the community where it is based. Going by its current code, much focus is on its customers, employees, and suppliers. Although su...