governance and ethics (Essay Sample)
the task was about governamce ad ethics. the main concern was whether businesses should incorporate ethics in their management or not. case example is volkswagonsource..
GOVERNANCE AND ETHICS
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Every year there are many businesses which are being set up with the sole idea of making money. In this contemporary world, a business is seen to be thriving if it has some positive cash flows regardless of their other seen or unseen consequences on people and on the environment. This has not gone well with the environmentalists who are now demanding more from the companies especially those that have been known to cause air pollution. Many laws have been put to [lace regarding the emission of carbon and other toxic gases in the atmosphere by the relevant governments and it is the high time the corporates involved take and support the initiative.
The new millennium sustainable development goals came up with a framework of a collective responsibility from each one of the players from each sector of the economy to reach the goal of sustainable development. Sustainable development must be able to mind the needs of the future generations as well as the present generations without compromising either of them. This type of development is governed by three basic principles: economic, environmental, and social consideration of a project. An economically sustainable project is a project able to produce goods and services effectively while maintaining manageable levels of government external debts (Mansouri, 2016:210). It also avoids extreme sectoral imbalances which can adversely affect various sectors in the economy such as industrial production and agriculture. An environmentally sustainable project on the other hand protects the ecosystem through prevention of emission of harmful substances into the atmosphere. Additionally, a socially sustainable project achieves distributable equity and contributes to delivery of social services e.g., gender equity, health and education. It also embraces public participation. Green companies should come up with initiatives which meet the sustainable development definition. Since time after the industrial revolution of the west and the emergence of other economies in the different parts of the world, large companies have been known to contribute directly or indirectly towards emission of large carbon to the atmosphere. It is until recently companies like the Volkswagen and others in the automotive industry were made to comply with the manufacture of low carbon emitting vehicles and which are environmentally friendly (Ameen, 2020:8). This took some time before they could comply due to non-existing laws prohibiting them from manufacturing high carbon emitting vehicles and lack of accountability from their managements.
On April 2016, 175 Members states from different parts of the world gathered in Paris and signed The Paris Agreement. Through the agreement, parties agreed to transform their development trajectories towards limiting warming to below 2˚C above pre-industrial levels. In regards to the above target, International Energy Agency (IEA) developed a 2˚C scenario, which sets out a pathway which may avoid consequences of climate change in a large proportion. The scenario suggests a large increase of all low-carbon sources (schillemans and Bovens, 2019:189). This agreement can be achieved if the big corporates cooperate and gear towards this scenario.
Big corporates are governed though different governance models which makes them either more compliant to the set laws governing them or not. This is made possible through the decisions of the decision makers and how efficient they are in communicating and addressing the problem at hand (Mitchell, 2017:872). There are many theories and concepts governing the corporates from the board managed corporates to the stakeholder’s theory and the CSR theories.
The main similarity between the two concepts of stakeholders and corporate social responsibility is that both stakeholder theory and CSR stress the importance of incorporating societal interests into business operations. These interests may range from environmental to human needs. Sometimes however, the two concepts differ in that stakeholder theory suggests that the key responsibilities of the business overall; corporate responsibilities, where responsibility to the society (which is often represented by the communities where business operates) is a very important but only one part among other corporate responsibilities. This does not give any pressure to the organization to be liable to the community when they fail to do their part in ensuring they give back to the community in their most appropriate way possible. CSR gives priority to one aspect of business – its orientation toward the society at large, that is its social orientation – over the other business responsibilities. The theory on stakeholders posits that the aim of the business should be stakeholder centered so that it aims at deriving benefits for the stakeholders through methods that benefit them. (Psaros, 2018:18). The composition of stakeholders differs from one company to the other because of the nature of the businesses. However, in most instances, it comprises of the employees, consumers, the community, financiers and the investors or the owners of the company. All these stakeholders play an equally important role and therefore none should be compromised. The directors should rather find ways in which to bring their needs in the same direction collectively. (Boyd, 2020: 1898). This has been found to be difficult in executing some ideas in the same direction because there are many parties involved. For all these parties to come to a consensus is a very difficult thing.
The large family groups and family-owned companies is another managerial theory which a family dominates in the decision making of a company. Though there might be managers who act as the face of the company, many of the decisions emanate from the family members who control from outside. These agencies or companies have problems because the managers acts at the call of the family members and acts as the ceremonial person controlling with no powers to decide. This is the big problem with this type of governance. The family has all the powers to make on critical issues regarding the company. Most often they decide not to enact certain innovations so as to stay in business and to shun away competitors who would certainly make them go out of business or lower their profit margins. Such companies or agencies have less responsibility to the community surrounding it and any decision to do any certain social responsibility lies with the family, the owners. These companies are mainly found in the manufacture and processing industry where some family founded a certain processing firm and the company becomes generational and control its activities either directly or indirectly from outside. These companies are slow to adaptation to environmentally friendly innovations for the fear of the family to run out of business or loose their business to competitors. Their social responsibility is towards the family’s interest and will. This is not the best model in coming up with environmentally friendly initiatives since many of these family-owned companies do not directly affect the environment directly and may not feel obliged to take or contribute towards such non-profit-making idea. When left to act alone they may never act at all towards any environmentally beneficial outcomes.
Public companies have diverse approaches to board structure and operations within the parameters of applicable legal requirements and stock market rules. The are regulated by the government directly or indirectly and the board members are selected publicly. The board is selected by the representatives of the people. The board members in their first meeting choose their chairman who controls and call the meetings. The board’s overall mandate is to ensure that the company is running well and implementing its mandates under the law. They appoint the managers who are responsible for the daily running of the company. The managers are accountable to the board and the board is accountable to the public through its appointing authority. The board makes critical decisions in the running of the company and can sack and employ new managers depending on the suitability and the score of the managers. They have the powers but the power is not vested to any one person but the whole board makes a certain decision together through a vote or a consensus. The board leadership must be independent for effective corporate governance. In this matter, the board structure is irrelevant. Accordingly, the board should appoint a lead director, also referred to as a presiding director or the chairman of the board and it may combine the positions of CEO and chair or has a chair who is not independent. The independent directors appoint the lead director and also determine the period for which they will serve. These independent directors are the representative of the government or the people. The board has the powers of making any kind of decision regarding the running of the company. This form of governance is good because it has level of accountability. One group is accountable to the other and they are not the end of any decision making as the directors above can quash or approve any strategic matter regarding an issue. This has been perhaps why it is widely used in the public sector because it requires a lot of accountability on the finances and the decisions made by the board of directors affect many people and some other companies or entities may be affected by their decisions. The main weakness of this type of model in governance is that it may take time to implement a certain idea as there are many parties involved in coming up with the final d...
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