11. Ethics & Corporate Governance

Question 1

What is corporate governance (quote)?

Answer 1

“Corporate Governance is concerned with the structure and systems of control by which
managers are held accountable to those who have a legitimate stake in an organisation.”
– Johnson, Whittington, Scholes – Exploring Strategy.

Question 2

What is corporate governance?

Answer 2

• Concerns the relationship between an organisation & its stakeholders
• Requires formal systems, controls & processes within a firm to enable effective & accountable governance to take place.

Question 3

The increased focus on corporate governance has been driven by many factors including:

Answer 3

1. The trend of separation of ownership & control in many organisations (known as the agency problem or the principle/agency issue)
2. The growth in strength of view that organisations should consider & be accountable to wide stakeholder interests
3. Impact of IT & speed of communications; harder to hide unethical practices, increased risk and potential costs and damage of exposure
4. Number and impact of high profile corporate scandals in last 20 years
5. Increased regulation - professional guidelines & codes of practice

• Can see that they are internal and external factors

Question 4

What is the chain of governance?

Answer 4

Describes or identifies the groups of different stakeholders directly involved in and having an influence on an organisations governance structure.

Question 5

Chain of governance depends on various factors in each individual organisation including:

Answer 5

1. Type of organisation (service, manufacturing).
2. Geographical coverage (local, regional,global)
3. Size - larger companies tend to have longer & more complex chain of governance
4. Way the company operates (eg all key activities in house or using outsourcing or subcontracting)
5. Ownership (private, public, joint, franchise, etc)

Question 6

Public?

Answer 6

• Government or government agencies.
• State owned - major oil & energu companies

Question 7

Private?

Answer 7

• Owned by their shareholders
• Larger private companies either privately owned or with shares that can be openly traded

Question 8

Combination of both public & private?

Answer 8

• Dentist
• Part NHS funded part private

Question 9

SMES?

Answer 9

• Family business or entrepreneur

Question 10

Subsidiary Companies?

Answer 10

• Owned by part company or part of conglomerate

Question 11

Family owned business?

Answer 11

• Small businesses or SMES
• Can be large eg Walmart

Question 12

Professional partnerships

Answer 12

• Owned by senior partners in the practice
• Accountancy, brokers, solicitors, medical practices