GOVERNANCE - A synonym for government; act of governing with authoritative direction and control (Webster's Third New International Dictionary) - The focus is on worldwide thrust toward political and economic liberalization (World Bank) - Umbrella concept towards comparative politics that fills analytical gaps (Goran Hyden) - Goran further states that it’s a conceptual approach and rational concept that concerns constitutional nature and creative intervention by political actors which are socially sanctioned - Involves interaction between the formal institution and those in civil society. Elements in society wield power and influence enacting policies and decision concerning social upliftment (British Society) - excels the collective meaning of government, state, and good government - From scholars, it’s the conscious management of regime structures to enhance public realm GOOD GOVERNMENT/ GOVERNANCE - Integral part of governance - A high level of organizational effectiveness to policy formulation - Contributes to growth, stability, and social welfare - Does not necessarily presume a value of judgement Predictable and enlightened policy-making bureaucracy imbued with a professional ethos (World Bank) - Unlike poor governance which involves arbitrary policymaking, unaccountable bureaucracy, and unjust legal system - An ideal that is hard to achieve in totality EIGHT (8) ELEMENTS OF GOOD GOVERNANCE • Consensus-Oriented – requires consultation • Rule of Law – fair legal frameworks • Equitable and Inclusive – provides opportunity to maintain or improve well-being • Accountable - a key tenet; being responsible towards the consequences of own’s actions • Transparent – information is easily understandable, accessible, and available in all forms • Effective and Efficient – produces favorable results of meeting the needs • Participatory – freedom of expression. • Responsive – processes serve the best interests within timeframe CORPORATE GOVERNACE - Derived from Latin “corporare” – combined in one body: “gubernare”- to steer or rule - A set of systems, procedures, and policies by corporates to ensure relationships with others are maintained transparent and honest - Coined first by Robert Ian Trickler in 1984 with his book as a process concerning the way corporates are governed, as distinct from the way business within those are managed. It addresses the issues faced by BOD. - A system by which organizations are managed and controlled to achieve its objectives - Direction, management, and control of an organization (Cadbury) KEY PLAYERS Stakeholders are affected by corporate’s decisions • Shareholders – institutional investors who votes on vital issues • Directors – decides and develops long-term strategies • Officers – makes day-to-day decisions HISTORY AND FRAMEWORK - Corporation was born in Britain with an 1844 Act - In 1855, shareholders were awarded limited liability and roles of ownership and control were separated - In 1922, Cadbury Report provided a Code of Best Practice for companies built around key principles of accountability, probity, and transparency. - The cornerstone of good corporate governance is when all the stakeholders’ interest are considered and protected - Corporate Social Responsibility has a direct linkage to a company having good corporate governance - Ultimate goal of every business is to gain profit without compromising social responsibility - A corporate need to be accountable, transparent and ethical THEORIES STAKEHOLDER THEORY - company has wider range of responsibilities to a broad range of stakeholders rather than simply its shareholders - First described by Dr. F. Edward Freeman - Contrary to Milton Friedman’s shareholder’s theory that says a company is beholden only to shareholders - Stakeholders are those groups without whose support the organization would cease to exist - examines the needs of not only shareholders but of every faction associated with the organization AGENCY THEORY - as the business grows the effectiveness of an individual or a small group of individuals to effectively manage the business declines consequently - Investors or shareholders are the principal while managers or directors are their agents that makes decisions to best protect the principal’s interest - no agents are trustworthy and if they can make themselves richer at the expense of their principals they will (Institute of Chartered Accountants in England and Wales, in November 2006) - Agents are more familiar with business operation - Roles of agents: a. use the asset to create profit; b expand the initial capital; c preserve the asset of the business - focuses on a checks-and-balances type of governance STEWARDSHIP THEORY - Having a single leader creates one channel to communicate business needs to the shareholders - Company executives protect the interests of the owners or shareholders and make decisions on their behalf - has a clear objective of stakeholder satisfaction - A steward is someone who protects and takes care of the needs of others. - inspired organization whose mission is to preserve, protect and grow social and economic assets - Stewardship governance requires that a CEO be trustworthy and willing to put personal gains aside CORPORATE CULTURE - Organization is composed of different individual with different personality, values, objectives and ideas - shaped by its vision, mission and core values - Types: a. stagnant org b. chaotic org c. successful org - Shared meanings, values, attitudes, and beliefs that are created and communicated within an organisation (Ashkenasy, Widerson and Peterson) - set of shared taken for granted implicit assumptions that members of an organisation hold and that determine how they perceive, think about, and react to their various environments (Schein) - the best way we do things around here. (Bowers and Seashore) - an organization’s personality; a complex mix of factors that put together to shape an existing practice how things are done in the workplace - Culture includes unwritten rules; assumptions about expected office behavior; and shared values CULTURAL ICEBERG - shows the observable aspects of a culture is just a small part - three components: Behaviors and practice – words and actions Interpretation – how we feel the core values should be Core Values – unobservable learned ideas of what are good or bad and comprises a major part of iceberg BUSINESS ETHICS - a study of moral standards and how these apply to the systems and organizations (Manuel Velasquez) - the application of moral standards to the structures, policies, systems, and decision-making processes that facilitate business activities and affect the people within an organization (Further, Batson and Neff) - organizational principles, values, and norms Morals – personal philosophies Principles– basis of rules; pervasive boundaries on behaviors Values – enduring socially formed beliefs and ideals TYPES: • Code of Ethics • Company Policies • Process Guidelines • Ethic in Marketing BUSINESS - entity engaged in professional, commercial, or industrial activities - legal entity engaged in economic activity - idea generation to develop and deliver products - organized efforts to produce and sell goods and services for profit - end goal is always to earn profit by fulfilling corporate social responsibility to its internal and external stakeholders - begins with a business concept and a name - business name can be a valuable asset to an entity - mostly form after development of a business plan¸ a formal detailed document of a business’ goals, objectives, and strategies; essential when borrowing capital TYPES OF PRODUCTS • tangible vs intangible • durable vs nondurable • consumer vs industrial TYPES OF BUSINESS • Sole Proprietorship • Partnership • Corporation ETHICS - study of right and wrong - behaviors made within a group’s accepted values - values and judgments play a critical role DIFFERENCE B/W AN ORDINARY DECISION AND AN ETHICAL ONE - lies in the point where the accepted rules no longer serve, and the decision maker is faced with the responsibility for weighing values in a situation which is not quite the same as any he or she has faced before - the amount of emphasis decision makers place on their own values and accepted practices within their company ETHICAL CULTURE - code of conduct that employees use to respond to ethical issues - Business Compliance and ethics compliance are intended to be the basis of core values and ascertain appropriate conduct - acceptable behavior as defined by the company - creates and nurtures shared values and is driven by top management - has a direct influence on: 1. employee commitment and trust 2. investors loyalty and trust 3. customer satisfaction and trust - Employee commitment is when a worker believes that his/her future is anchored to that of the organization; the more the employee feels inclusivity in the organization the more they value the organization’s welfare - provides a foundation for efficiency, productivity, and profit - contributes to customer satisfaction, the lifeline of every business as it is a one of the most important factors for business success. - Cannot be nurtured unless the entity has achieved adequate financial performance in terms of profits
