For companies to be competitive, they need regular investments and other sources of financing. High-level corporate governance is an essential requirement for obtaining financial support for enterprises. This type of company governance determines its future welfare and stability. For this reason, its use is more critical for investors than the financial state, which may be inferior to competitors (Price, 2019). In their presentations, Summer Taylor and Mark Thek, based on their experience, presented aspects they see as crucial for the company’s success and also addressed the topic of corporate governance. Despite the different professional backgrounds, their information helps to understand the fundamentals of enterprise prosperity better.
Proper management of the organization determines its activity, efficiency, and place in the market. Corporate governance is a system and rules of interaction on various aspects of the company’s business between managers and owners, shareholders, investors, and other stakeholders (Naimah, 2017; “Principles of corporate governance,” 2016). Such a vision shifts the focus from internal to inter-corporate relations and is most beneficial for large corporate associations, including several divisions or organizations controlled by a single managing center.
Summer Taylor is a certified public accountant (CPA) and business advisor. On this, she devotes the first part of her presentation to audit, the Public Company Accounting Oversight Board (PCAOB), standards and rules for reporting information, and other similar aspects (Taylor, 2020). Regulations and controls such as Generally accepted accounting principles (GAAP), Securities and Exchange Commission (SEC), or others are vital for corporate governance, as they ensure transparency of information and investor security. To achieve high-level corporate governance, companies need clarity. It affects not only the quality of corporate governance but also the value of the enterprise (Beekes et al., 2016). The information should be substantial, the basis for investors’ decision-making, and other stakeholders of the company. Such data’s quality and reliability allow investors to assess the corporation’s level and risks of investment.
The second part of the presentation focuses on the theoretical foundations of corporate governance and the role of the board of directors (BOD). The information is concise and understandable, but not enough to maintain interest; an example of Enron’s case could return it. Non-compliance with standards, as well as lack of integrity of managers, can be the reasons for the fall of organizations. As Taylor (2020) notes, basic corporate governance regulations were introduced in response to crises or significant failures. One of the most famous examples, widely known and mentioned in the presentation, is the collapse of Enron Corporation, which, in one year from a rich and innovative company, became bankrupt.
Enron was a successful corporation that was involved in gas transportation, communications, and other areas. However, it turned out that the company, with the help of fraud, forged information about finances, and the leaders knew about this and did not take measures (Dibra, 2016). This collapse had consequences and led to the creation of new rules and legislation changes to improve the accuracy of financial reporting for public companies. As a result, in 2002, President Bush signed the Sarbanes–Oxley Act (SOX). The document increased the responsibility for hiding or producing false financial statements in attempts to deceive shareholders. Moreover, the scandal affected auditors who did not want to lose a client and ignored the mistakes, so a PCAOB was created, which controls and regulates audit firms. They are prohibited from providing their clients (with some exceptions) with consulting services at the same time as the audit.
There have also been other crises in the past that called into question the existing rules. They were the motivator for the creation of new regulations. For example, the Securities and Exchange Commission (SEC) formation in 1933, aimed to regulate the securities market, was a reaction to the fall of Wall Street in 1929 (Taylor, 2020). In response to the 2008 financial crisis, the Dodd-Frank Act was presented, made to regulate various aspects of economic relations. Nowadays, the world is experiencing a new problem – the COVID-19 pandemic and new mitigation measures might be expected.
Mark Thek, in turn, in the presentation, speaks about the experience, which he considers the most important in corporate governance. He worked in several companies and rated working with the board of directors in most of them as a positive experience. Thek (n.d.) believes that good relations with investors can be built by fulfilling the task of profiting and as a result of adding value to the investors themselves. The main direction for development in work, he considers leadership qualities. His presentation’s advantage is understandable information that is not burdened with complex theoretical concepts.
The dependence of corporate governance on people’s leadership qualities is not as evident as when studying companies’ usual functioning. However, in relations with investors, Thek highlighted the achievement of the benefits and implementation of the organization’s mission as the “pushing factors” (n.d., p. 6). For such success, in turn, a leader is needed – he or she will motivate workers to improve the quality of such governance and achieve goals. The leader creates a cohesive team of followers, unites specialists for more effective work, and controls their activities.
Mark Thek is an experienced business leader, and his presentation is based on his personal experience. For example, he puts a basis of leadership on such qualities as intelligence, courage, and heart, creating three legs for the “leadership stool” (Thek, n.d., p. 8-9). The application of these qualities must be balanced to be more effective. Another aspect that he considers crucial in achieving the benefits for the company, and, accordingly for investors, is a straightforward approach. For example, he does not seek total control, which is manifested in micromanagement, but calls to give employees freedom, show heart and provide them with the right to mistake. Moreover, according to Thek (n.d.), the path to profit should also not be complicated. He recommends using the one link approach – to complete a few tasks to achieve the goal. For example, Esterline Power Systems divided the path to profit into only four phases, not spending resources and time on extra activities.
Thus, the presentations of Summer Taylor and Mark Thek reveal various topics close to their professional activities. They complement the theme of corporate governance – a system of rules, tools, and mechanisms for corporations’ control and management. Taylor relies more on theoretical material, and interest in the topic was mainly supported by an example of Enron’s negative experience. However, the presentation reveals many important aspects of transparency that underpin corporate governance. Thek describes his experience and what he sees as essential in such a governance approach. His presentation is more motivating but does not raise as many questions and does not discuss as many aspects of the problem as Taylor does.
References
Beekes, W., Brown, P., Zhan, W., & Zhang, Q. (2016). Corporate governance, companies’ disclosure practices and market transparency: A cross country study. Journal of Business Finance & Accounting, 43(3-4), 263-297.
Dibra, R. (2016). Corporate governance failure: The case of Enron and Parmalat. European Scientific Journal, 12(16), 283-290.
Naimah, Z. (2017). The role of corporate governance in firm performance. SHS Web of Conferences, 34, 1-6.
Price, N.J. (2019). Why corporate governance is important to investors. Diligent Insights.
Principles of corporate governance. (2016).
Taylor, S. (2020). Corporate governance – IRL. [PowerPoint slides].
Thek, M. (n.d.). Leadership stool. [PowerPoint slides].