The Corporate Governance and Ethics

The concerned article that is to be by Rankin et al., (2018, p. 224), deals with the survey of the corporate Governance in companies the Australian nations. It includes the motive to collaborate the corporate ethics and responsibility in the decision making process in the corporate governance mechanism to ensure that the corporate governance framework in Australia is as effective as possible. The focus is on the potential benefit in reviewing the frameworks of foreign corporate governance, because they may point the way to a more effective framework in Australia. The main purpose of the discussion is to survey on the corporate governance frameworks in the relevant article that supports the statement by Rankin and establish the corporate ethics as a major element of Corporate Governance.

The mechanism of corporate governance refers to the control and the direction of the corporations. It is the structure of governance and the various principle procedures that the participants of the organizations adapt in the supervising their operations (Ferrell and Fraedrich, 2015). It is asset of decision making procedures that guides the business members including board of directors, managers, shareholders, creditors, auditors and other company stakeholders. The corporate governance technique includes monitoring of actions, practices, policies, and the decisions of the corporations, the associated agents and the shareholders who are impacted. The attempts to align the stakeholder’s interest affect the corporate governance practice. When it comes to ethics, it can be said that it is the lifeblood of the governance process. The corporate ethics refers to the form of professional principles of ethics that assesses the moral and ethical form of the business environment. Therefore as said by Dodd (2017), the corporate governance and business ethics goes hand in hand.

 As said by Lim (2015) about the concept of corporate governance is in Australia, the foreign experience of corporate governance may provide Australia with valuable lessons in the techniques to fix potential problems with its system, or illustrate problems that can be avoided. This article had reviewed, at a general level and as a basis for further research, corporate governance in several South-East Asian jurisdictions.

For this study the few corporate governance mechanisms has been  selected and  reviewed to come into several conclusions. The first conclusion is that the countries have considered the advantage of setting up corporate governance frameworks. Secondly each of the countries seems to have understand the correlation between the absence of corporate governance and corporate failure (Yasser, Entebang and Mansor, 2015). Each of the country’s framework of corporate governance seems to have been revised or designed, at least in part, as a response to the economic crisis in the Asian countries along with the corporate collapses. Moreover, the corporate governance frameworks are similar to that in place in Australia. There several themes that are similar in each of the country’s framework. The of the board of directors of the countries has focused in efficient corporate governance codes, in other words they have emphasised on the  necessary requirement of  skill and knowledge for carrying out duties towards the company’s resources. Other various procedures observed by the author in this article includes the identification of the directors and their duties, specifically for those who act in good faith in the optimum interests of the organisation. At last, the author has observed that most of the jurisdictions have adequate frameworks which they have enforced varies widely in a large extent. In this jurisdictions the thing that is common is that lack of recognition of the value of corporate governance (Du Plessis, Hargovan, and Harris, 2018). This due to the result of a weak rule of law within the jurisdictions, and the existence of corruption at different levels of those societies. Another important factor identified in this article which may contribute to this is a lack of shareholder power is in Singapore and Australia, where a significant proportion of the population owns shares. There is a risk of the people who are politically empowered and legally aware, such that they would be unlikely to tolerate infringements on their rights (Kim, Miller, Wan, and Wang, 2016).

Corporate Governance in Australia

The Corporate governance along with the ethics reflects the organizational philosophy out of which one motive is the determination of the fundamental goals of a company. For instance if  the objective of the  company is to maximize  the returns of the shareholder, then forgoing  the profits for other concerns is a violation of  the fiduciary responsibility of the company (Fang, Maffett,  and Zhang, 2015). The people associated with the corporations are entitled legally to the liabilities and rights due to citizens as persons.

Ethics are the standards or rules that govern the daily decisions of the organization. Tricker and Tricker (2015) consider the term “ethics” in the business with conscience or a simplistic sense of “right” and “wrong.” Andriof and McIntosh (2017) on the contrary argued with this concept and proposed that ethics is the internal code that governs the conduct of the individual associated in the business. Corporations and professional organizations, particularly boards in licensing, generally will have a written “Code of Ethics” that governs standards of professional conduct expected of all in the field. It is important to note that “law” and “ethics” are not synonymous, nor are the “legal” and “ethical” courses of action in a given situation necessarily the same (Christensen, Kent, Routledge and Stewart, 2015). Statutes and regulations passed by legislative bodies and administrative boards set forth the “law.”

The corporate governance technique includes monitoring of actions, practices, policies, and the decisions of the corporations, the associated agents and the shareholders who are impacted. The attempts to align the stakeholder’s interest affect the corporate governance practice. When it comes to ethics, it can be said that it is the lifeblood of the governance process. The corporate ethics refers to the form of professional principles of ethics that assesses the moral and ethical form of the business environment (Armstrong,  Blouin, Jagolinzer, and Larcker, 2015).

Practices and rules of the Corporate governance, in which the organizations are run or  governed, is  important because it is the governance of what is arguably the most important institution of the  economy that is capitalist.  In one article by Bowie (2017), he has argued that it is necessary to emphasis on the three issues while considering the corporate governance. According to him the first issue is the concerns which people or groups who are provided with membership. He has given the highest priority to this. The rights of membership might be given only to one class of people associated in the business (Visser and Tolhurst, 2017). The corporate governance system that concentrates on the shareholders is the most prominent instance of this method within the realm of the corporation. In the companies, the membership rights are given only to those people who provides the firm with financial capital. Membership rights might alternatively be provided to more than one class of people or groups. In the corporate ground, these bodies are usually said to have a stakeholder system of corporate governance. Alongside shareholders, typical stakeholders include employees, members of the local population, and representatives from supplier firms, customers, and local government (Davies, 2016).

Evidences in support of the statement by Rankin et al.

Secondly in this regard, it is important to assess the rights that are given to members.  There are two broad sets of rights that are significance.  Firstly, it is beneficial to emphasise on the character of the rights of the people enjoy over governance. Secondly, it is necessary to assess the rights over the surplus generated by the organization (Abdullah, Ismail and Nachum, 2016).

Thirdly, it is important to understand the representation modes available to members. Direct representation might be used to represent members’ interests. The people might vote directly for a representative on the board of governors. Indirect representation occurs when organizations are used to represent members (Crane and Matten, 2016). For example, a council for consumer might be used to represent the views of customers. Proxy representation occurs when a self-appointed board is used to represent the stakeholder constituency (Hasan, Kim, Teng, and Wu, 2016).

Conclusion

The discussion is concerned deals with the mechanism of corporate governance as stated by Rankin et al., (2018, p. 224) that collaborated the corporate ethics with the governance process in the corporations. It has been identified that corporate ethics is an important factor in the decision making process in the organization. Various articles has been reviewed and the techniques of corporate governance in various business has been scrutinized to support the statement. All the authors have more or less agreed with the statement and has established the fact with the help of the evidences.

References

Abdullah, S.N., Ismail, K.N.I.K. and Nachum, L., 2016. Does having women on boards create value? The impact of societal perceptions and corporate governance in emerging markets. Strategic Management Journal, 37(3), pp.466-476.

Andriof, J. and McIntosh, M. eds., 2017. Perspectives on corporate citizenship. Routledge.

Armstrong, C.S., Blouin, J.L., Jagolinzer, A.D. and Larcker, D.F., 2015. Corporate governance, incentives, and tax avoidance. Journal of Accounting and Economics, 60(1), pp.1-17.

Bowie, N.E., 2017. Business ethics: A Kantian perspective. Cambridge University Press.

Christensen, J., Kent, P., Routledge, J. and Stewart, J., 2015. Do corporate governance recommendations improve the performance and accountability of small listed companies?. Accounting & Finance, 55(1), pp.133-164.

Crane, A. and Matten, D., 2016. Business ethics: Managing corporate citizenship and sustainability in the age of globalization. Oxford University Press.

Davies, A., 2016. Best practice in corporate governance: Building reputation and sustainable success. Routledge.

Dodd, E.M., 2017. For whom are corporate managers trustees?. In Corporate Governance (pp. 29-47). Gower.

Du Plessis, J.J., Hargovan, A. and Harris, J., 2018. Principles of contemporary corporate governance. Cambridge University Press.

Fang, V.W., Maffett, M. and Zhang, B., 2015. Foreign institutional ownership and the global convergence of financial reporting practices. Journal of Accounting Research, 53(3), pp.593-631.

Ferrell, O.C. and Fraedrich, J., 2015. Business ethics: Ethical decision making & cases. Nelson Education.

Hasan, I., Kim, I., Teng, H. and Wu, Q., 2016. The effect of foreign institutional ownership on corporate tax avoidance: International evidence.

Kim, I., Miller, S., Wan, H. and Wang, B., 2016. Drivers behind the monitoring effectiveness of global institutional investors: Evidence from earnings management. Journal of Corporate Finance, 40, pp.24-46.

Tricker, R.B. and Tricker, R.I., 2015. Corporate governance: Principles, policies, and practices. Oxford University Press, USA.

Visser, W. and Tolhurst, N., 2017. The world guide to CSR: A country-by-country analysis of corporate sustainability and responsibility. Routledge.

Yasser, Q., Entebang, H. and Mansor, S., 2015. Corporate governance and firm performance in Pakistan: The case of Karachi Stock Exchange (KSE)-30.