Chapter 3 - Role of governance and ethics in the strategy process Flashcards

1
Q

What is corporate governance?

A

System by which companies are directed and controlled

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2
Q

What is governance?

A

The system by which companies are directed and controlled in the interests of shareholders and other stakeholders

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3
Q

What benefits does corporate governance bring?

A

Increases accountability of management and maximises sustainable wealth creation
More attractive to investors as they believe that better financial performance is achieved through better management
More attractive to customers and investors which could lead to revenues and share price rising

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4
Q

What purposes and objectives does corporate governance have for the private sector?

A

Purpose is to monitor those parties within a company which control the resources owned by investors
Objective is to contribute to improved corporate performance and accountability in creating long term shareholder value

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5
Q

What purposes and objectives does corporate governance have for the public sector?

A

Objective more complex and conflicting
Appraised according to value for money they generate
Value for money may be defined as performance of an activity to simultaneously achieve economy, efficiency and effectiveness.

Means maximising benefits for the lowest cost and has three constituent elements:
Economy - measure of inputs to achieve a certain service or level of service
Effectiveness - A measure of outputs
Efficiency - optimum of economy and effectiveness

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6
Q

What are the characteristics which are important in the development of an appropriate moral stance?

A

Fairness - a sense of equality in dealing with internal stakeholders, sense of even-handedness in dealing with external stakeholders
Openness/transparency
Innovation
Scepticism
Independence
Probity/honesty
Responsibilty
Accountability
Reputation
Judgement
Integrity

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7
Q

Why is corporate governance important to help maximise the effectiveness of an organisation’s strategy?

A

Ensures that no individual can dominate the board of directors
Improve diversity of the board of directors
Adequate internal audit and control systems should ensure that the board has accurate information about the current operations of the company
Having good corporate governance is attractive to investors

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8
Q

What is corporate social responsibility?

A

Firm’s obligaition to maximise its positive impacts upon stakeholders while minimising the negative effects

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9
Q

Why might a business choose not to pursue CSR?

A

Increased cost of sourcing materials from ethical sources
Having to turn business away from customers considered to be unethical
Management time that can be taken up by CSR planning and implementation

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10
Q

Why may businesses feel that CSR is a vital part of their strategy?

A

Good CSR can attract customers
Attract a higher calibre of staff
Access to a wider human resource base
Fining or increasing taxes of more polluting businesses
Form of advertising
Increase financial value of the business

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11
Q

What is the four part model of Carroll’s to CSR?

A

Philanthropic Responsibilites - be a good corporate citizen
Ethical Responsibilties - Be ethical
Legal Responsibilties - Obey the law
Economic Responsibilities - Be profitable

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12
Q

What is the economic reponsibilitys of Carroll’s four part model?

A

Fundamental level - all other levels rest on this
Shareholders demand a reasonable return
Employees want safe and fairly paid jobs
Customers demand quality at a fair price

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13
Q

What is the legal responsibilty of Carroll’s four part model?

A

Law is baseline for operating within society
Accepted rule book for company operations

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14
Q

What is the ethical responsibilty of Carroll’s four part model?

A

Relates to doing what is right, just and fair
Actions taken in this area provide a reaffirmation of social legitimacy
Naturally beyond the previous two levels

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15
Q

What is the philantrophic responsibilty of Carroll’s four part model?

A

Relates to discretionary behaviour to improve the lives of others
Charitable donations and recreational facilities
Sponsoring the arts and sports events

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16
Q

What are the four possible strategies that Carroll suggest that the organisation can adopt with regards to CSR?

A

Reaction - corporation denies any responsibility for social issues
Defence - corporation admits responsibility but fights it
Accommodation - accepts responsibility and does what is demanded of it
Proaction - seeks to go beyond industry norms and anticipates future expectations by doing more than is currently expected

17
Q

What is sustainability?

A

Use of resources in such a way that they do not compromise the needs of future generations. It also involves not polluting the environment at a rate faster than they can be absorbed

18
Q

What are ESG issues seen as?

A

Environmental - Issues relating to the quality and functioning of the natural environment
Social - Issues relating to the treatment of people and communities
Governance - Issues relating to how organisations are run and managed

19
Q

What are the impact of technologies on CSR?

A

Quicker scrutiny
Greater stakeholder engagement
More intergrated CSR practices
Improved measurement
Increased openness in the ecosystem

20
Q

What is corporate ethics?

A

Relates to application of ethical values to the business behaviour.
Encompasses many areas ranging from board stategies to how companies negoatiate with their suppliers
Goes beyond legal requirements and is to some extent therefore discretionary
Companies provide details of their ethical approach in a corporate and social responsibility report

21
Q

What is the key areas included in a code of corporate ethics?

A

Purpose and value of business
Employees
Customer Relations
Suppliers
Shareholders
Society
Implementation

22
Q

What does Johnson, Scholes and Whittington define ethical stance as?

A

Extent to which an organisation will exceed its minimum obligations to stakeholders

23
Q

What are the four possible ethical stances?

A

Short term shareholder interest
Longer term shareholder interest
Multiple stakeholder obligation
Shaper of society

24
Q

What is short term shareholder interest?

A

Aim to maximise profits in the financial year.
Believe that it is the role of government to set the legal minimum standard

25
Q

What is the multiple stakeholder obligation?

A

Accepts that the organisation exists for more than simply making a profit, or providing services at a minimal cost to tax payers

26
Q

What is the shaper of society?

A

Ideologically driven and sees its vision as being the focus for all its actions

27
Q

What are the fundamental ethical principles that professionals need to follow?

A

Integrity
Objectivity
Professional competence and due care
Confidentiality
Professional Behaviours

28
Q

How can ethical conflicts be resolved?

A

Gather all relevant facts
Establish ethical issues involved
Refer to fundamental principles
Follow established internal procedures
Investigate alternative courses of action
Consult with appropriate persons within the firm
Obtain advice from professional institutes
If the matter is still unresolved, consider withdrawing from the engagement team/assignment/role