Corporate governance

Corporate governance

Concept of corporate governance:

The strategic planning of corporate governance is beneficial for all the corporate firms in managing accountability, balancing the responsibility and also balancing the profitability and sustainability of the businesses. The organisations can develop effective strategies for improving their corporate governance so that they can work innovatively by managing their sustainability. All the corporate firms focus on the stakeholders where the owner of the companies aims at maximising values for the stakeholders who are engaged with the business. In this regard the strategic planning of corporate governance is beneficial for the companies to make the business sustainable in long run. Through managing corporate governance, the companies can maximise their profitability and run their business ethically without any legal issues.

Managing corporate governance also helps the companies to lead their employees towards achieving success by fulfilling their needs and motivating them to work innovatively. On the other hand, it also provides an opportunity to satisfy the shareholders by giving them higher return as well as create positive environment where the values of social communities can be maximised. Hereby, through managing the corporate governance of the firms, it can expand the business sustainably and secure future development. Through managing corporate governance, the firms can improve their reputation and brand image in the international market. It can also improve their market share and gain high competitive advantage through improving their corporate governance. Hereby, the companies can build brand loyalty and improve trust among all the stakeholders by developing effective strategic planning for improving corporate governance.

Strategies of improving corporate governance:

There are effective strategic planning through the corporate firms try to improve their corporate governance so that they can secure future sustainable development. The board of directors and committees try to develop legal and regulatory framework were business ethics can be maintained properly. It will help the firms to manage the business operations in long run ethically. In addition to these, organisational hierarchy also needs to be maintained as well as the managers and leaders try to improve organisational culture so that the employees can work safely. Efficient internal control and monitoring the whole process are necessary to achieve the organisational goal successfully. Transparency also needs to be maintained in order to ensure corporate governance where the team members also trust the owners and managers of the companies in sharing information. Positive attitude in the workplace, cooperation, communication with others, managing diversity and respect for each other are the main strategies to manage corporate governance of the companies.

Equitable and fair treatment in the workplace with all the stakeholders is also helpful for the companies to maintain strong corporate relationship with all the people engaged with the business and retain them for long run. Additionally, clear vision and mission as well as managing own responsibilities and cooperative leadership practice in the workplace also helps the companies to manage corporate governance and secure future sustainable development. Moreover, providing incentives, performance related pay, to the employees and suppliers as well as safe workplace, freedom to work, safety policies and encouraging innovation and creativity of the employees are also helpful for improving the corporate governance of the firms.

Agency theory:

The agency theory explains the relationship between the principles such as agents, shareholders, managers and company’s managers. The theory helps to understand the interest of the managers and also the interest of the shareholders. Balancing the interests of both the agents is the main strategy under agency theory where the companies can manage their corporate governance through applying agency theory. There are internal conflicts under the agency theory as the interests of the shareholders and managers are different. Hereby, it is the role of the owners and managers to manage both the interest and maximise the organisational goals in long run. The interest of the shareholders includes high earning per share, high current share price, improved price earning ration, high dividend per share and increasing investor’s ration. On the other hand, the manager’s interest is to achieve the organisational objectives through increasing wealth and providing remuneration and benefits to all the stakeholders. Managing both the interests of the shareholders and managers can be possible through performance based incentive plan, managing conflicts through negotiation and cooperation.

Stewardship theory:

The Stewardship theory is beneficial for the companies to manage environmental and social responsibilities through proper management so that it is possible to secure future sustainable development. The purpose of the theory is to retain more clients in the business by managing its social responsibility and improving corporate governance. The theory is important for motivating the stakeholders for further growth and achievement. High value of commitment and it is involvement oriented where it provides an opportunity to the companies to manage their social and environmental responsibility. The managers and owners try to enhance their performance by building trust among the employees as well as building proper corporate relationship with all the stakeholders. It therefore has benefits on the employees where the owners try to maintain transparency and treat all the employees fairly to meet the organisational mission and vision. It also has positive impacts on the customers where the customers will be beneficial as the owners and managers of the company try to satisfy their clients by managing their products quality and setting affordable price so that the values of the customers can be maximised.

RBV theory:

The Resource Based View (RBV) theory is beneficial to identify the resources and capabilities of the companies through which they try to improve their capability so that they can achieve high competitive advantage ion long run. Through this theory, it is possible to analyse the internal resources of the firms through which they try to create their core competencies to gain high market share and secure future sustainable development. The competitive advantage can be achieved through organisational resources and its capability to perform and satisfy their stakeholders. As peer the RBV model, the resources and capabilities are utilised for improving the firm’s competitive advantage which further helps to implement effective strategic planning. This is beneficial for the firms in increasing the return on investment and satisfies all their clients successfully. There are tangible, intangible and human resources through which the firms try to improve their competitive advantage. In this regard, the tangible resources are financial asset and physical asset including plant, land, equipment and mineral reserves. On the other hand, the non-tangible resources are organisational culture, reputation of the company, brand relationship, technological advancement, patents and trade secrets. The human resource in this regard plays crucial role in enhancing the capability of the firms through collaboration, communication and technical skills.

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