Checks and balances

Corporate governance plays a crucial role in developing the organization image in the market. Corporate governance is the mechanism, processes and a relationship between the corporation and the society, which is owned and controlled by the top level of the company. The structure of the corporate governance depicts the structure of the organization. The rights and responsibilities of the different participant of the company are included in the corporate governance. These different participants are the stakeholders of the company. Stakeholders include suppliers, customers, community, government, agents, directors, creditors, and managers. The corporate governance in the organization is made to control and monitor the affairs, policies, and practices of the organization. There are various scandals has been identified in the current life like scandals of World.Com and Enron (Sanda, Mikailu and Garba, 2010).

In the article also, issues have been discussed which are related to the corporate governance which are not followed by the top-level management of the company. The AMP chairperson David Murray has refused to accept the corporate governance and his duties to perform in the organization. The issue in the article was related to the change in the social policy of the company in which the corporate governance principles are also introduced to have the good image of the company in the market. However, the chairperson and directors of the company refused to accept them and take against action to not to implement in the organization. The protest was made by them not to bring the new social policy change in the organization. This whole incidence will affect the financial performance of the company and hinders the image of the company too (Udemy, 2014).

The issue gets the fire when Murray stand on the point of not following the ASX principles of corporate governance, which are introduced with the concept of a new policy to operate in the company. The policies are favored by the 30% of the female staff from the board and are disclosing the risk in the climate change. The Australian Institute of company directors has started the campaign against the proposal for companies to have the special license. This concept is found highly subjective and will treat their stakeholder differently from one another, which have caused the discrimination under stakeholders of the company and are not acceptable. The issue of a social license is raised by the corporate governance Council that is related to the combination of investor and business groups (Block, Miller, Jaskiewicz and Spiegel, 2013).

Goodwill and market reputation

Numerous issues have been identified in the article and are related to the corporate governance. The corporate governance is related to the processes, styles, steps, rules, and regulations to be followed in the organization. The chairperson of the company David Murray has refused to follow the Corporate Governance Principles in the organization. Follow the corporate governance is necessary for every company as it contributes to the image and goodwill of the business. The corporate governance should be equally followed by all the level of management irrespective of the authorities and responsibilities are given to them (Scherer, Baumann-Pauly and Schneider, 2013).

The Australian Institute of Company Directors has started the campaigns against the proposal for the companies in relation to the implementation of the social policy. The license of social policy has not been accepted by Murray.  He has made protested against the social policy (Song, Thomas and Yi, 2010).

The laws and ethics are not able to get enough importance by the business. The concept of social license to operate in the market wants to be revised by the top-level management of the company. The socially responsible manner in which the company is operating its business needs to be revised by the top-level staff of the company. This change is done by the business to change the corporate governance rules of the country. These changes in the social policy are considered the highly subjective matter of discussion in the business. This change in policy will interpret that there will change in the priorities given to the stakeholders (Financial Review, 2018). The stakeholders will be treated differently according to the post and holding in the company, which is against the corporate governance principles. Therefore, the change in the policy is not to be implemented in the organization. This will make the differentiation in the levels of management and stakeholders of the company (Bebchuk, and Weisbach, 2010).

The issues aroused by Murray to make changes in the principles of corporate governance influence the business. This influence on changing the social policy against the corporate governance is not legally mandatory. To cover up all the issues raised in the organization, Chairperson Murray of the ASX Maurice Newman says that the whole concept of introducing the new social policy is raised to have reduced the overall cost of the business and makes the customer happy (Castañer and Kavadis, 2013).

Checks and balances

Corporate governance is the important tool to check and control on the risk associated with the organization. The corporate governance has the power to reduce the risk in the organization. If the organization is involved in the high-risk level projects then all the stakeholders should be informed about the risk with the help of the corporate governance. In this way, the risk can be mitigated in the organization as all the information is shared with the stakeholders in advances. This brings the transparency and confidentiality in its business (Muller, 2017). From the issues discussed in the case, it has been analyzed that there should be a proper check on management function too in the organization.

Training of directors

Goodwill and market reputation

The goodwill of the organization plays a significant role in the market. If the organization is having the control of the governance model then it can able to maintain the reputation in the public also. This can be maintained by using the various tactics, which include the use of CSR activities in the organization, marketing planning and campaign and better relations with the stakeholders of the company. If the corporate governance is not followed in the organization then it will be difficult for a company to survive in the market for a long period. In the absence of the corporate governance, the reputation of the business is at stake because if any fraudulent activities will spoil the image of the company. There are various examples, which are related to the lack of corporate governance in the organization like the case of Enron and WorldCom (Claessens and Yurtoglu, 2013).

Training of directors

It is considered the difficult task to train their directors and finding the right people for the right jobs. Training is giving them to ensure that they follow the corporate governance in their practice. Directors play a major part in the decision-making process of business. The success and failure of the business highly depend on the directors of the company. Corporate governance encouraged the transparency and confidentiality in monitoring every activity of the business (Adams, Hermalin, and Weisbach, 2010). From the issues raised in the article depicts that the corporate governance is the duty of all the people working in the organization irrespective of their power and responsibilities given to them.

Public Image

The image of the organization also plays an important role in developing their stakeholders and clients. The image of the company depicts its financial position and stability in the market. If the market image of the company is not good then it has to improve by the company. This improvement can be done by involving the governance models in the organization. This will make the good image of the company in the eyes of the public. With the ways, the business is running today in the market needs to develop their own governance rules and policies to be implemented in the organization (McCahery, Sautner and Starks, 2016). From the case, it has been identified that the image of the organization will be affected by the corporate governance of the company.

Improved shareholder communication

Public Image

By using the corporate governance in the model of the business, all the information must be shared with the shareholders of the company, which makes them believe that the company is investing their funds on the right place. This makes them satisfied as they are getting all relevant information from the company about their funds. This improvises the communication between the company and its shareholders of the company (Chung, Elder and Kim, 2010). From the case, it has been identified that the shareholders should be informed about all the details necessary should be communicated to them.

Reduces the risk

The corporate governance reduces the risk in the managerial process. By following the corporate governance in the organization, the early detection of fraud and scandals can be identified in the business. The prevention can be done by making the accountability in the business. As the entire person are responsible for their own work and no one can blame another person for their work. Corporate governance is like the self-policing. By applying this in the business, it is possible for an organization to handle its matters and affairs (Abor and Biekpe, 2007). From the case, it has been identified that by analysing the need of social policy in the business helps to reduce the future risk of the business.  

Having a successful business

Corporate governance is the key to the success of the business. The success can grow itself by indulging the governance model in its structure. Corporate governance made the business successful in short-term of time and will make the image of the organization positive in the community. From the article, it can be analyzed that the business gets the negative image when the chairperson of the company refused to accept the corporate governance in its policies and activities (Ahi and Searcy, 2013).

Theories of the corporate governance are important to be implemented in the organization to fulfill the needs and demand of the members and staff working in the organization. There are different theories of the corporate governance available and followed in the organization. However, in the article, the theories that can be applied are the stakeholder’s theory and the Stewardship theory of corporate governance (Financial Review, 2018).

Stakeholder’s theory

Stakeholders are the person who is related to the business affairs and get affected by any decision making in the company. Stakeholders include the suppliers, clients, customers, government, directors, managers, and community. The stakeholder theory depicts the relation between the stakeholders and the company. This relation needs to be maintained properly to have the growth prospects in the future by the company. If the stakeholders are not satisfied with the performance of the company then the company will not be able to grow and survive in the market for the long period. To maintain the stability of the company and its development, stakeholders of the company should be satisfied (Filatotchev, Jackson and Nakajima, 2013).

Improved shareholder communication

In the article, it has been analyzed that the stakeholders of the company are not satisfied with the performance and decision-making did in the organization. Follow of corporate governance should be done at all the level of management irrespective of its post and powers given. All the stakeholders are treated equally while equal proportionate of rights and responsibilities to be performed.in the article, from the act of Chairman Murray has not accepted the corporate principle rules which make the other people dissatisfied in the organization (Financial Review, 2018). According to the principles of the corporate governance, all the stakeholders should be treated equally without any partiality and discrimination in the organization. Not accepting the corporate governance rules and policies made by the authorities made the other stakeholder feel distrust and should be on the highest priority. This will develop the trust of stakeholders in the management of the company (Aghion, Reenen and Zingales, 2013).

Resource Dependence theory

This theory deals with the allocation of the resources to the organization and its members. In this theory of corporate governance, the board of the company is responsible for providing the resources in the organization to its executives. This providing of resources should be done adequately by the board members in order to maintain the policy and able to achieve the organizational goals. This theory in the organization recommends the financial position and human capital efficiency in the company (Armstrong, Guay, and Weber, 2010).

From the article, it has been analyzed that the board of directors and its executives are not distributing the resources in the right manner. The distribution of roles and policies in the organization are not done in the right direction. The introduction of the social policy to reduce the cost is done just to cover the non-acceptance of corporate governance by Murray in the company (Giroud and Mueller, 2010). The company has to be focused on the relationships with all the groups of the organization for the individual benefits.

It has been argued that the provision of resources increases the organizational functioning, performance and its survival. Directors bring the resources and allocate it according to the need of the people. In the article, it is the duty of the director to distribute the resources but the distribution and follow of policy is not done right by the directors itself. This should be rectifying in the company by following of the social policy and ethics in the organization (Chung, Elder and Kim, 2010).

Reduces the risk

Conclusion

From the above discussion, it can be concluded that the corporate governance plays a significant role in the success and failure of the company. The image of the company depends on the policies and procedures followed by the company. From the above arguments, it can be concluded that Mr. Murray has to accept the corporate governance. Issues discussed in the article are related to the non-follow of corporate governance by the company and its members. Due to this, the implementation of social policy is not applicable in the organisation, which causes a huge damage. This damage affects the organisation performance in the market. The following of laws and ethics are found compulsory in every organization to maintain the reputation in the market. This non-follow of corporate governance in the organization gave rise to the discrimination between the stakeholders of the company. The theory of stakeholder of corporate governance has not been followed in the organization due to which stakeholders get dissatisfied with the performance of the company.

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