Chapter 3 Flashcards
What is corporate governance?
System by which companies are directed and controlled
What does good governance require?
Direction from within - Board of directors, need to monitor forces through risk analysis, Need to control operations
Control from outside - regulatory framework that defines codes of best practice, Wider view of corporate posiiton in the world
What is the basic purpose of the private sector corporate governance?
Monitor parties within a company which control the resources owned by investors
What is the primary objective of private sector corporate governance?
Contribute to improved corporate performance and accountability in creating long term shareholder value
What are the key concepts of governance?
Fairness
Innovation
Independence
Openness/transparency
Scepticism
Honesty
Responsibility
Accountability
Reputation
Judgement
Integrity
What is the importance of corporate governance?
Ensures no individual can dominate the board
Improve diversity of board
Adequate audit ensures board have accurate information
Attractive to investors
What is corporate social responsibility?
Firms obligation to maximise its positive impacts upon stakeholders while minimising the negative effects
Why is it argued that maximising wealth of owners is social responsibility?
Increased returns will lead to increased tax payments
Proportion of shared owned by pension funds
What are some arguments for CSR?
Attracts customers
Attract a high calibre of staff
Access to wider human resource base
Fining or increasing taxes of more polluting businesses
Form of advertising
Increase financial value of business
What is Carrolls four part model of CSR?
Philanthrophic - be a good corporate citizen
Ethical - do what is right and fair
Legal - obey the law
Economic - be profitable
What is Carroll’s four possible strategies?
Reaction - denies responsibilitu
Defence - admits responsibility but fights it
Accomodation - does when demanded of it
Proaction - anticipates future expectations
What is sustainability?
Use of resources that does not compromise future generations
What does ESG stand for?
Environmental - issues relating to natural environment
Social - issues relating to treatment of people
Governance - issues relating to how organisations are rund
What is business sustainability?
Ensuring organisations implement strategies that contribute to long term success
What are the reasons for sustainability plans?
Compliance
Reputational risk
Cost cutting and efficiency
What are the impact of technologies on CSR?
Quicker scrutiny
More integrated CSR practices
Greater stakeholder engagement
Improved measurements
Increased openness in ecosystem
What is corporate ethics?
Application of ethical values to business behaviour
What are the key areas in code of corporate governance?
Purpose and value of business
Employees
Suppliers
Society
Customer relations
Shareholders
Implementation
What is ethical stance?
Extent to which organisation will exceed its minimum obligation to stakeholders
What are the four possible ethical stances?
Short term shareholder interest
Longer term shareholder interest
Multiple stakeholder obligation
Shaper of society
How do you resolve ethical conflicts?
Gather relevant facts
Establish ethical issues
Refer to relevant principles
Follow internal procedures
Investigate alternative courses of action
Consult with appropriate persons
Obtain advice from professional institutes
Consider withdrawing if matter is unresolved
