Business organizations in the contemporary environment face different challenges, which include environmental turbulences and dynamics. As a result, most of the current business organizations develop effective and efficient business strategies. Effective and efficient business strategies play a significant role on development, growth and prosperity.
Corporate governance is a vital concept in enhancing business strategies. According to Monks and Minow (2011), corporate governance refers to effective systems by which business organizations are controlled and directed. Corporate governance is about promoting fairness, accountability and transparency. The following is an evaluation of Medtronic Incorporation with a reference to the corporate governance concepts.
Describe essential elements of corporate board governance
Essential Elements of Corporate Board Governance
Corporate governance involves various essential elements that include strategy, accountability, compliance and performance. These are the pillars that ensure efficient operations within business organizations. While strategies provide business directions, compliance pillar ensures that stakeholder adheres to prescribed procedures.
Accountability, on the other hand, ensures that there is an adequate transparency within an organization, hence, making the performance better. Baker and Anderson (2010) confirm that these pillars have made organizations enhance their corporate governance.
Medtronic Inc. Case Study
In Medtronic Inc., what is the issue that the Board needs to resolve?
Medtronic Incorporation is a medical device firm that has been producing and manufacturing cardiac and neurological medical products since 1949 (Spaulding, Pick, Chernak and Lorsch, 2006). The firm has experienced significant changes, which have transformed operations and structure, thereby, leading to additional output, sales and profitability.
However, the firm is faced with an issue of finding the new CEO following the expiry of the time of the outgoing CEO, Bill George. Despite Collins being a better contender in replacing George as the new CEO, the firm faces leadership transitional challenges (Spaulding, Pick, Chernak and Lorsch, 2006).
In addition, the firm has issues related to turnover and culture. Medtronic Incorporation’s culture dictates that after attaining 70 years, an employee is supposed to be retired from the firm. This has led to increased turnover, thus, a possibility of changing their culture.
What is the concept of director independence and why would it be important for Medtronic?
Notably, one of the main changes that has taken place within Medtronic Incorporation is enhancement of autonomy. Earlier on, Medtronic Incorporation’s management affairs were handled by the board of directors (Spaulding, Pick, Chernak and Lorsch, 2006). However, with improvements in the structure and operations of the firm, Medtronic Incorporation currently has an autonomy in respect to board’s interference in management.
Consequently, the management team has the desirable autonomy, which makes them be more productive and viable. What is more, autonomy of the directors has enhanced the accountability within the firm. Accountability, as mentioned earlier, is one of the pillars of corporate governance, hence, making Medtronic Incorporation be effective and efficient in its operations.
What suggestions would you make as a corporate governance expert on improving the governance at Medtronic Inc.?
From the concept of corporate governance and its essential pillars, Medtronic Incorporation needs to develop better strategies in order to enhance its performance. Such strategies should include changing the turnover culture in the firm. Despite the fact that Medtronic Incorporation has a culture regarding turnover, there is a need to develop a better criteria for selecting new employees who replace those attaining compulsory retirement age.
For instance, Medtronic Incorporation should concentrate on employing younger people to ensure that employees work longer in the firm. This makes the turnover culture effective. Every stakeholder within Medtronic Incorporation should comply with such strategies. In addition, Medtronic Incorporation should be involved in creating independent management teams in all the departments whilst defining responsibilities of the workers involved. Consequently, this strategy will enhance accountability, which is another pillar of corporate governance.
Baker, K., & Anderson, R. (2010). Corporate Governance: A Synthesis of Theory, Research, and Practice. Hoboken, NJ: John Wiley & Sons Publishers.
Monks, R., & Minow, N. (2011). Corporate Governance. West Sussex, UK: John Wiley & Sons Publishers.
Spaulding, N., Pick, K., Chernak, A., & Lorsch, J. W. (2006). Board of Directors at Medtronic, Inc.. Boston: Harvard Business School Publishing.