Corporate Governance Essays - Corporate Law, Management,

Corporate Governance CORPORATE GOVERNANCE The Oxford English Dictionary defines governance as the act, manner, fact or function of governing, sway, control. To govern is to rule with authority, to exercise the function of government, to sway, rule, influence, regulate, determine, to conduct oneself in some way; curb, bridle (ones passions, oneself), or to constitute a law for. Governing is, therefore, a whole range of actions, initiatives and response patterns - from rule through influence to self-control and self-regulation. By inference it includes driving as well as steering. Therefore, in seeking to define governance and the purpose it is to acheive, it is necessary to give adequate consideration to its antitheses freedom and individualism. Governance as such has been largely taken for granted in the past. Something that does not require a systematic and detailed analysis, efforts or commitment of resources. For most of human existence governance has been imposed on the majority by a small elite, this form of governance depended on curtailing the freedom of the ruled in order to maximize the power of the rulers. The monopolizing of power by rulers made it virtually impossible for defects in governance either to be recognized by the ruled or to be challenged by them. Governance has gone by default since regimes did not share decisions with their subjects but left them to suffer the consequences of failure. In more recent times the growth of democracy together with the waning of communism and other extreme regimes has led to increasing concern at undue concentrations of power and its misuse. The loss or depreciation of long accepted models has created intellectual turmoil and a search for better processes of governance. Thus emerged the modern concept of governance based on the foundation that untrammeled personal freedom is akin to lawlessness. Such an employment of personal freedom requires a strict internal discipline or self governance that is rare. If we admit the concept of original sin, we are faced with the need for a code of morality and a process of self governance. As Geoff Mulgan suggests morality is a word that can be notoriously abused. Thus making self governance an imperfect art and a shaky foundation for the governance of groups . As corporates realised this, new models of governance came to the fore. Muller defines governance thus: Governance is concerned with the intrinsic nature, purpose, integrity and identity of an institution with a primary focus on the entitys relevance, continuity and fiduciary aspects. Thus Governance involves monitoring and overseeing strategic direction, socioeconomic and cultural contexts, externalities and constituencies of the institution. Thus, the primary goal of governance is making sure the right questions get asked at the right time, at the right place, by the right persons, to the right persons and in the right manner. It is not a coincidence that the worst corporate performers are the ones that had once been so securely on top that they stopped asking questions. Governance is usually delivered through an agreed constitution, through a complex web of customs and practices, underpinned by a shared system of ethics, to a range of stakeholders from the shareholder to the customer in that institution. Styles of governance vary depending on the nature and size of the body concerned. At one extreme is the rule-based style adopted by public sector bodies, which may be concerned with conformity rather than performance. At the other extreme are the churches and clubs where governance is based on trust. Most corporate bodies have an amalgam of both trust and rules in appropriate proportions. The Logic being that trust can only work with open governance. The basic prerequisite to achieving successful and effective governance is the establishment of certain criteria for systematic governance. As a minimum these are likely to be: 1. the identity of the body 2. definition of its purpose 3. how the purpose is to be achieved 4. membership criteria (both explicit, such as shared interests, and implicit for example shared values) 5. how the body is to be administered 6. how the body relates externally 7. how success is measured 8. termination arrangement In practice the constitutional details of most organizations will be more complex , interrelated and overlapping, but the basic elements need to be present in order so as to