The techniques of good corporate governance


"Corporate governance refers to the technique by which companies are directed and managed. It means carrying the business as per the stakeholders' desires. It is actually conducted by the board of Directors and the concerned committees for the company's stakeholder's benefit. It is all about balancing individual and societal goals, as well as, economic and social goals".

It is the interaction between several participants like company's management, shareholders and board of directors to boost up the performance of the organization towards the desired directions. It is important to have a positive relationship between the owners and the management in an organization without any conflict. The owners should be capable enough to measure the management actual performance is according to the standard. These are the important dimensions of corporate governance and they should not be overlooked. In the wake of global corporate governance crisis, many organizations are increasingly focusing on ethical leadership. Leadership is about guiding new direction in to a working atmosphere, it's about relationship and linking between organization management with the stakeholders, customers, workers and to whomever it concerns.

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Analytically corporate governance and leadership are two important approaches with some sort of similarity between them. Conventional definition of the corporate governance is of contracted nature which mainly focuses on the relationship of manager and stakeholder. However recent definition is with the extended boundaries of governance associated with the role played by various stakeholders in shaping organization behaviour. Shareholder theory defines a wider set of corporate constituencies. Here we differentiate between horizontal and vertical type of governance both in political and economic life and distinguish various consequences to that of modern corporate governance. In the mid 19th century modern corporation came into being when British legislation granted companies autonomous legal personhood to the limited liability. In recent the modern corporate governance is growing rapidly. The term first appears in 1981 in Georg Siedle's article corporate governance under the foreign Corrupt practices Act' (Seidl 1981). Following ten years after 1981 only an additional sixteen articles appeared on the subject. About 1085 more articles on corporate governance were published in 2002. A prominent aspect of OECD definition about corporate governance appear in 1999 and revised in 2004 describe corporate governance as;

"a set of relationships between a company's management, its board, its shareholders and other stakeholders [that] provides the structure through which the objectives of the company are set, and the means of attaining those objectives and monitoring performance" are determined (OECD 2004; 13).

According to the modern corporate governance theory corporate governance aims for the effective strategic decisions and determining ways in making those decisions. Board of directors are blessed with utmost responsibility and complete authority by corporate governance. It ensures strong economic development by adopting transparency as well as interest of the shareholders both in minor and major cases and also ensures the safety measures for the organization. It also ensures, exercise and recognize the rights of shareholders. Including a board scope, social and institutional values it encourages moral, ethical and trustworthy environment in order to run the processes of the organization smoothly.

Purpose of this literature review is to examine and analysis the external communication effects on the management of small and medium sized companies. In this paper we also focus on the responsibilities of board of director of the organizations.

It is the concern of transparency that how a company is managing the basic condition for the company's stakeholders and shareholders to evaluate the company interests. Then only a constructive interaction can be contributed by that of transparency. To set out corporate idea accordingly to manage organization communication is seems to be the issue of transparency not only to the organization itself but to their surroundings as well. The question is concern with the real case of transparency. Identity of the corporate is a concern of logos and symbols used by different organizations and it varies from company to company also from location to location, but this is not possible to communicate properly with the use of symbols and logos, where the stakeholder take into consideration their own sense of judgment about it. However there are three possible ways to communicate the identity of the corporate, those three ways are Behaviour, communication and symbolism. Behaviour is the essential part to identify the organization and is the most effective medium for the company identity. It is important for the stakeholder and shareholders to judge the company by its actions. Also company's behaviour can particularly be supported by proper communication and symbolising. Secondly communication is the most prominent and flexible way of conveying the message of company's identity through verbal and visual messages. Another benefit of the communication flexibility is that results can directly be signalized to the company's stakeholders and shareholders. Thirdly symbolizing can attract the company's value what it stand for. Altogether these three are the medium of conveying the message of organization identity. Companies represent themselves by presenting annual reports on some of the important elements. Four of the most important elements are as:

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Statement with shareholders and stakeholder.

Company ownership and stakeholder's relation.

Statement on the task of the board.

Company mission and vision.

One of the most important tasks of the board is to make decision about the company's mission and vision. According to the study of British board, board of directors are working as gate-keepers in decision making process and influencing the development speed of the organization Stiles and Taylors (2002).(Parum 2005b).

As a result of 2001 Danish recommendation transparency has been improved in corporate governance. In a latest Securities and Exchange Commission (SEC) study about 1200 companies, 29.4 % of out side directors have relationship with that of organization management. Hence apart from insider some out-siders board's have relationship with the internal management. Most of the board's are running with such an environment where the CEO of the company could be suspicious independently about the board members raising issues. Under such circumstances board may approach high level of consensus in CEO lead. This approach is useful sometimes for the company. But if there is high level of consensus it may lead to difficulties. Jay Bourgeois is the first who analysis the company consensus effect on the top management and he found an inverse relationship on the firm finance. On the basis of above theory he emphasises that company's executives with decline performance may reflect to hold back differences and disagreements and support the consent felt by the top management is needed for better performance. Another theory based on ten companies Quinn has emphasises that agreement on the organizational visions with-in the top management can put together a company nonflexible and less-able to cope with ecological changes. To avoid this threat he suggests the organizations to corrode consensus. Both of them (Bourgeois and Quinn) noticed that management having a large number of different opinions had a high substitute ways to strategic problems. While high level of consensus can decline the efficacy of board decision and can lead to group think. The definite problems cause by groupthink Janis (1972) acknowledged eight symptoms of groupthink. Those are Illusions of invulnerability, collective rationalization, belief in innate integrity of the group, stereo type view of outsiders, pressure on dissent group member, self control of doubts and minority opinion, shared illusion of concord and the emergence of self appointed mind guard. Board can be focus to groupthinks that interrupt or cut off controversy. It is suggested that increasing level of controversy board decision up to some extent can be improved. However the issue of controversy can be resolve by compromising or bargaining. According to the research controversy is important in a sense that it creates rational understanding and improves reasoning thus create elevated quality of better choices that was possible originally. Different experimental theories states that controversy can create healthier open mindedness, enhanced problem solving and improved amalgamation of unlike views. Thus we can't neglect usefulness of controversy and conflict as it has sound effect on intellectual improvement of decision making. Now the question arsis how to encourage conflict to get the most successful result of decision making.? Research finding shows that it is possible only with the principal of Devil's advocacy. In the above mentioned approach a member from the decision-building group is agreed to arise critiques on one of the designed strategy. This group member aims to pinpoint weakness in the hypothesis of the plan, its in-house problems and inconsistency which can be caused of its failure. In these circumstances Devil's advocacy is in its best effect to present their point of view against the mainstream members as consistently as possible.

Responsible Leadership

"We sometime miss the board with corporate governance because we tend to appoint great CVs onto over boards, but not necessorily those we can trust with our business and stakeholder," says Dale Jones. In the time of universal corporate governance disaster the importance of moral leadership arise for a number of companies. corporate governance can sometime be attracted by the great CV's and thus can appoint wrong person for the job and can miss the opportunity to appoint such people who are in a good suitability position and can be proved more beneficial and trustworthy both for the organization and stakeholders. He says organizations wants to maximize the level of profit in order to make it valuable for the stakeholders, but they need to obey the rules, but if they don't they will be no longer in the business game. He also was emphasising more on the moral values rather than technicalities while appointing a board's member. Jones says companies are tending to focus on complying with rules and regulations. Rather then complying on ethical values. He believe that if we tend to focus on ethics at first and then complying on rules/regulations then our selection for the right person will based on morality which can ultimately direct us to the compliance. Thus providing more beneficial results and can lead us to transparency. The CEO of the company should place himself in such a position where he could see and ensure that the right team of management is in place.


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Ethical and moral values work as a leverage for an organization judgment making procedure and they find out how it will work in cautious time. Once we determine that the person to be selected is technically competent then he should be judged on the basis of moral values to observe that he can make a favourable decision in the crisis time of the organization. Considerate board members are those who are able to fit into place themselves at the exact time according to the situation, they should be able to welcome the creative dissent, and they should also be in a position to of maintaining a long term view. It is the characteristic of good governance and leadership that they can work both as a science and art. Other important characteristic of good governance and leadership are that they should attain and maintain accountability. They should be well disciplined and work on fair basis. They should seek independency and should work in such a way that they attain transparency. And the most important characteristic of good governance and leadership is responsibility. It is the responsibility which can cover all the others characteristic in it, it depends upon how the leaders understand the word responsibility.