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A Focus on Corporate Governance and the Relationship with Business Research Team | Posted On Thursday, April 18,2019, 03:51 PM

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A Focus on Corporate Governance and the Relationship with Business



Business and corporate governance is the focus of the 21st century. Corporate governance is all about the way power is exercised on corporate bodies. Businesses will make sure that companies are governed on ethical dimensions and power is exercised on them. Business ethics are inherently a part of corporate governance. In today’s environment, stakeholders have high expectations that companies must run in accordance with good corporate governance practices. 

Business values and standards lie between the forces of the market and the law. Business and the government work on various environments, including technological, legal, social, economic, and political dimensions. Business ethics is concerned with what is right and wrong in organizational decisions, behavioral practices and policies. Business ethics has principles and guidelines to help people make informed decisions to balance economic interests and social responsibilities.

Ethical beliefs change with time and as they do, laws change to reflect the changing ethical beliefs of society. Accordingly, Governmental and regulatory laws and procedures are being updated.

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A Focus on Corporate Governance and the Relationship with Business

Values, Standards, Laws and Beliefs

The first area of concern is that of prescribed enforced laws, where values and standards are written into a legal system. For example, behavior of Indian citizens and organizations in India are governed by laws of the country. Citizens and companies must pay taxes and they are forced by the law to avail vehicle insurance. On the other hand, they have an area of free choice of availing health insurance, and there are no laws governing this. An individual’s choice of buying a vehicle or a company’s decision to take employees on an outing is other examples of free choice. The area of ethics lies between these extremes.  

There are no particular laws governing this area. But, there are certain standards of conduct that are based on shared principles and values that guide individuals and organizations. In the areas of free choice, organizations and individuals are self accountable. In contrast, accountability is through enforceable laws. For example, exceeding the permitted speed limit to rush your pregnant wife to a hospital is considered ethical but an offense by law. 

The Ethical Issues Arising from Growing Globalization of Business

The ever growing globalization of business has posed a challenge to businesses in adopting fair labor standards to ensure that products are manufactured under standard safe conditions. Well established organizations are criticized for turning a blind eye on substandard working conditions at a few locations. 

Many ethical issues in global businesses are due to political and cultural differences across countries. Due to this, work practice that is considered ethical in one country, might not be ethical in another country.

Mangers in multinational organizations might have to work and coordinate between branches of two different countries and they often find it difficult to understand the ethicality of work practices due to the cultural differences. The most common ethical issues found in multinational organization are:

1) Employment Practices:

Many of the ethical issues are a result of inferior work conditions in the host nation as opposed to those in the home nation. Conditions of trade are not fair to the lesser developed nations. Trade has developed steadily due to exploitation of the lesser developed countries.

2) Human Rights:

In many countries, the most basic human rights are not respected even today. Few rights that are taken for granted like freedom of speech, freedom of movement, freedom of association, assembly, political support and so on are not universally accepted. One of the best examples of this is the apartheid in South Africa. During apartheid days in South Africa, the system denied basic political rights to the majority of the non white population and mandated segregation of whites and non whites, reserved certain occupations exclusively for whites and prevented non whites from being placed in positions where they would manage whites. Bangladeshi workers producing sportswear for Olympic Sponsors during the 2012 Olympics claim beatings and harassment.

3) Environmental Pollution:

The rise in ethical issues is due to the inferior environmental regulations in host nations when compared to the home nation. Most developed nations have regulations that govern the emission of pollutants, disposing toxic waste and so on, which developing and underdeveloped nations lack. The fact to consider is if it is ethical or right to pollute a foreign country for your economic gains.

4) Corruption:

Corruption is an old issue existing from centuries. There has always been and will always be corrupt Government officials. Global businesses often gain economic advantages by bribing top Government officials. Corruption is certainly bad, but bribing Government officials would mean there would be more number of jobs created, which is good in the long run. Well established organizations often make deals by bribing Governments.

5) Moral Obligation

Multinational Organizations have powers to control resources and they are able to move production across countries. This power is not only restricted by laws and regulations, but also by the discipline in the market. Business owners must consider the social consequences of economic actions when making business decisions. There must be a presumption in favor of decisions having both good economical and social consequences. Multinational Organizations having abused their power for private and personal gains are immoral. Remember the killing of the anti-sterlite protestors in police firing in Tuticorin.

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