The manner in which organisations are governed or controlled coins the concept of corporate governance. Essentially, corporate governance can be described as the administrative procedures of the corporations. In other words, the corporate governance is the administrative structure, design and the management of firms.
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The process of corporate governance involves various processes including supervisory and the market systems, the relations between the management and the organisation as well as all the stakeholders. In addition, the corporate governance involves attaining the objectives for which the firm is managed.
In the modern business framework, the external shareholders affected by the firm include clients, shareholders, suppliers, debtors, creditors as well as the communities in which the firm is operating. Internally, the stakeholders of the firm include the board of directors, management executives and the workforce.
One of the major functions of corporate governance is to prevent inconsistencies that may arise from various stakeholders. In other words, corporate governance processes emphasises on alleviating issues that may cause deviations in the proper functioning of the organisation. According to the current global corporate governance principles, the executive normally acts on behalf of the boards of directors that undertake corporate governance.
The core functions of the organisation are accomplished through the application of appropriate strategies, the firm’s culture, laws and regulations as well as institutions, which have greater effects on the manner in which the firm is operating. The most important aspect in the corporate governance concept is the manner in which the firm’s management can be held accountable to the stakeholders.
Essentially, corporate governance has greater effect on the effectiveness of the firms’ management systems and economic efficiency. Moreover, corporate governance emphasises on the interest of the shareholders. Actually, organisations are obliged to maintain and recognise the legal, contractual and market-driven responsibilities to personnel, creditors, investors, the local community and other policy makers.
Through the organisation’s board, the required competencies and expertise are significant in the review as well as the comprehension of the performance of the firm. Additionally, optimal output of an organisation is associated with the independence and commitment of the board.
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Most importantly, upholding integrity in running the firm’s state of affairs by the board of directors forms the foundation of augmented levels of performance. In other words, responsible and ethical decision-making processes depend on the maintenance of codes of conduct for the executives of the firm.
Another important concept of corporate governance is disclosure and transparency in all matters pertaining to the responsibilities and obligations of the organisation’s board and management. In other words, the maintenance and implementation of independent procedures that validate and guard the financial reporting of the firm increase the levels of stakeholders’ confidence.
In reality, the review of the firm’s structure of corporate governance is critical in augmenting the performance of the firm. In addition, the review of the governance structures helps in identifying various gaps and weaknesses in the firm’s management. For instance, despite the board of directors being the highest decision-making organ, the firm has taken several steps aimed at reducing the bureaucratic structures in management.
In this regard, the firm has adopted committees and encouraged teamwork in almost all operations. In addition, the operational conduct and regulation of systems, apparatus or machines of the firm including financing and production are critical in aiding the business.
The basis of the criteria for the review
The firm’s corporate governance will be reviewed through the applications of globally accepted principles and standards. Besides, the review of the firm’s corporate governance will be based on the standards, values and ethical obligations that has been applied globally and contained within the corporate governance reports.
The reports include the Cadbury Report of 1992, OECD Report released in 2004 and the Sarbanes-Oxley Act released in 2002 (Tricker, 2012). Among the reports, the OECD and Cadbury Report contain the expected general regulatory doctrines by which the corporations are confined to operate. In addition, the guiding principles are expected to ensure appropriate management of all the corporations irrespective of size and country.
On the contrary, the Sarbanes-Oxley represents the actions undertaken by the US federal government to domesticate the provisions of the two reports through various legislations. The importance of the application of the above principles is that they offer a general procedures and benchmarks through which the organisations governance can be based and evaluated.
The observation of individual rights and justifiable management of the Shareholders
The governance processes of the firm will be reviewed depending on the manner in which the management board has observed the individual fundamental rights of the shareholders and attained impartiality in the treatment of all investors. Essentially, the organisations governing body are obligated to uphold the rights of all stakeholders.
Essentially, the governing board should allow the stakeholders to exercise their rights and freedoms as portrayed in the universal human rights charters (Tricker, 2012). In this case, the stakeholders include the investors, suppliers, employees, shareholders, management and most importantly the customers.
Besides, the governing body of the organisation should ensure that all the stakeholders are given equal treatment irrespective of their status, position or functions (Sharma & Reddy, 2014). Impartiality in the management of the organisation affairs remains critical in the review of the firm’s corporate governance procedures.
Essentially, the guiding moral standard is that the contribution of each stakeholder is critical for the growth and development of the firm (Sharma & Reddy, 2014). Further, the firm should help the stakeholders perform their rights through free and open information flow between the senior management and the junior employees.
The interest of other stakeholders
Taking into consideration the interest of the stakeholders is one of the fundamental functions of the organisation human resources management. In other words, ensuring that the interest of the firm’s stakeholders is observed by the management but also applied in enhancing the general performance of the organisation.
Further, the firm has the contractual relationship with all stakeholders of the firm. As such, the organisation’s authority should understand the fact that they have a legal obligation to honour the contractual relationship with other stakeholders (Tricker, 2012).
In fact, the corporation should acknowledge the contractual, lawful, and social as well as market driven responsibilities to the non-corporate stakeholders including the policy makers, governments, debtors, creditors and the communities in which they operate.
Therefore, the performance of the firm’s governance processes will be reviewed according to the manner in which they have observed and taken into account the interest of all stakeholders.
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The roles and responsibilities of the board
The firm’s corporate governance will also be evaluated based on the manner in which the board has fulfilled its responsibilities (Reddy et al., 2010). In fact, the organisation have put in place and specified duties of each board member. The duties and responsibilities are either specific or general. In other words, the firm has specified the general functions of the management board and the responsibilities of the individual directorate (Reddy et al., 2010).
The assessment will be based on the how the governance board has performed at individual and group levels. In fact, the board needs to be equipped with wide management skills in order to carry out its responsibilities efficiently and successfully.
In other words, the members of the board need to be equipped with relevant information and knowledge to encounter the management challenges and appraise the general performance of the organisation (Tricker, 2012).
Integrity and ethical behavior
Integrity and ethical behavior is central in the corporate governance processes. Organisations are always advised to emphasise on integrity when selecting the corporate officers and the members that sit on the board (Reddy et al., 2010). The reason is that integrity is a significant component of any governance procedures.
In fact, the performances of any governance board are reflected on the manner in which they have upheld integrity and transparency in their management processes (Farrar, 2008). In this case, the governing board will be assessed on the integrity and transparency of their actions. To ensure integrity, organisations often develop ethical codes of conduct that has to be observed by all the stakeholders (Reddy et al., 2010).
In most cases, the organisations codes of conduct follow the general principles that are being observed internationally. Essentially, the directors of the organisation charged with the daily running of the organisation will be evaluated on the manner in which they have upheld the specified moral principles.
Disclosure and transparency
The main function of the governance board of directors is to ensure transparency in all management processes and accountability to the stakeholders (Reddy et al., 2010). Essentially, the firm’s management should provide an elaboration of the roles and responsibilities of the governing board and its members. Besides, the functions and limitations of the management should be made known to all the stakeholders.
Such actions ensure accountability within the firm. In other words, the roles and responsibilities of board and the management should be made public in order to enhance accountability to the stakeholders (Sharma & Reddy, 2014). In Google, the governing board is obligated to execute measures and autonomously verify as well as uphold the veracity of the firm’s financial reporting (Tricker, 2012).
The board’s governance performance will be evaluated based on the principle of transparency particularly in the integrity of the firm’s financial reporting. Essentially, the revelation of critical information regarding the firm should be secure, appropriate and well timed to ensure that all stakeholders have admittance to truthful and factual materials particularly in the financial management and performance.
The governance structure
The corporate governance structure will also be reviewed to establish whether the design is still within the global corporate governance standard structure (Tricker, 2012). While reviewing the structure, the roles and responsibilities of each board member and various committees under the area of their jurisprudence will be reviewed.
Reviewing the structure is critical in establishing the duplicated responsibilities as well as functions that can be reassigned to other areas. In the circumstances that the governance structure is found to be irrelevant, restructuring according to the required global standards will be recommended.
Corporate social responsibility
The performance of the firm will also be reviewed depending on the manner in which it has undertaken the corporate responsibilities.
The concept of corporate social responsibility is wide and encompasses the actions of the firm to the immediate stakeholders and the manner in which the firm is accountable for its actions to the stakeholders (Sharma & Reddy, 2014). In this regard, the governance of the firm will be evaluated on its relations with the stakeholders and the actions the firm has undertaken towards the welfare of the communities.
Critical review of the organisations governance
The firm governance overview
The firm is committed to maintaining the highest standards of corporate governance and business conduct according to the corporate governance guidelines and principles (Google, 2011). The firm also believes that these guidelines are essential in running the business in an efficient manner and in serving its stakeholders as well as maintaining integrity in the market place.
The firm’s governance efficiency is evident in growth rewards. For instance, the firm has experienced a substantial growth in most of the business processes as well as the major users of its products, advertisers, and consumers reallocating to online from offline (Dwivedi, 2008).
In addition, the firm is experiencing rapid improvements in search technology. As a result, speedy deliverance of relevant search outcome and comprehensive index has expanded. Furthermore, the governance structure has enabled the firm to develop products including Place Search, Instant Previews, and Google Instant.
Besides, strategic operations and coordinated efforts of the governance structure has led to aggressive venture into new businesses such as enterprise, cell phone, and display, which has led to faster growth of the firm. A strategic investment in decisive products like Chrome OS, Chrome, and Android is evident in the past years.
In fact, this has followed the firm’s philosophy of open platforms and infrastructure for the achievement of web users. Investment in technologies, services, products reflects the management focus on efficiency and customer’s satisfaction (Dwivedi, 2008). Generally, the connection between the governance and the business processes has enabled the success of the firm within the technology industry.
The governance structure
Google have adopted the horizontal governance structure and integration of functions. In fact, the board of directors currently manages the firm (Google, 2010). According to the firm’s governance structure, the president of the organisation is the principal executive officer and the chairperson of the board of directors. The president or the principal executive officer is above other directors which are equal in ranks though performs diverse functions.
For instance, the senior vice-president is the chief finance officer or Principal Accounts and Finance Officer (PAFO). The PAFO is in the same position with other directors of the firm including director and president of technology as well as the director and president of production.
The directors’ responsibility is to oversee the day-to-day operations of the firm. The directors run the firm with the help of various committees including executive compensation committee (Google, 2011). In addition, shareholders make the major decisions including appointments of the directors as well as critical financial issues. Google’s shareholders are composed of the individual and institutional shareholders as well as the mutual fund owners.
As indicated, the management structure has hugely contributed to the success of the firm. In fact, the horizontal integration has increased efficiency and effectiveness in the management processes and decision-making process.
In relation to the global corporate governance structure practices, the firm is one of the organisations that have adopted a unique and successful governance structure. In addition, the management structure has contributed hugely to the success of the business through innovativeness.
The roles and responsibilities of the board
Board of directors is the highest decision-making organ of the firm. Though the firm tends to minimise the bureaucratic structures, the board of directors makes all decisions. The bureaucratic structures are minimised through various committees as well as encouraging teamwork in almost all operations.
The firm’s culture of enhancing equality of employees, teamwork as well as encouraging individual growth of talent is critical in operations of the organisation. In addition, the freedom in individual and team decisions enhances effectiveness and efficiency in the operations of the firm (Google, 2011).
The short vertical structure and the encouragement of horizontal integration have been essential in enhancing creativity among the employees, which in effect create better products for the customers. The firm adopts the modern management practices and organisation structure that enhances free decision-making, encourages teamwork and creativity.
Integrity, ethical behavior and social responsibility
Google has broad defined values that are shared by all the stakeholders particularly the employees and the management. The central values are geared towards providing users with dispassionate access to information (Chaffey, 2007).
In addition, the central values are designed in such a way that it helps the firm to focus on the needs of the customers and provide the best services or products. In essence, the firms values are meant to abide by the legal requirements, industrial regulations and respect to the competitors (Chaffey, 2007).
The common values form the basis in which the firm has formulated its code of conduct. The approach of the firm is to have a code of conduct that fosters highest standards of ethical business (Sharma & Reddy, 2014). The firm beliefs are coined in its mission statement that emphasises mutual respect and trust among employees and users. Moreover, the firm believes that trust and mutual respect are basis for its success.
Besides, the firm’s code of conduct is geared towards serving their users. For instance, the firm upholds integrity, privacy in addition to freedom of expression while serving users. Moreover, the code of conduct encourages respect among the stakeholders as well as avoiding conflicts of interests. Most important is the preservation of confidentiality and protection of the firms’ assets.
The firm’s assets include the intellectual property, the confidential information and equipments (Dwivedi, 2008). Further, the code of conduct promotes financial integrity and responsibility as well as abiding by the legal requirements.
Besides setting up ethical standards as well as ensuring integrity and moral governance, the firm also engages in various corporate social responsibilities. In fact, the firm engages in creating awareness in various fronts such as climate change, education, public health and sanitation (Chaffey, 2007). However, these activities are connected to the firm’s long-term revenue generation.
Essentially, the management of the firm has undertaken various initiatives including developing renewable or green energy. In addition, the firm engages in prediction, identification, prevention and rapid response to various risks associated with climate change and infectious diseases. Moreover, the management of the firm has been involved in improving public services through public awareness and empowerment.
Google ethical governance also promotes the development of small and medium sized enterprises through capitalisation and risk management (Sharma & Reddy, 2014). Regarding integrity, ethical behavior and social responsibility, the firm’s governance has put in place adequate measures to ensure the objectives are achieved.
Disclosure and transparency
The firm’s governance has put control measures in financial management as well as the disclosure of critical information concerning the firm. However, the major controls are in financial disclosures that must be in accordance with the set procedures by management as well as statutory regulations including the exchange act.
The management must evaluate the financial control and disclosure procedures in pursuant to the regulations provided in the exchange act (Sharma & Reddy, 2014). The financial disclosure control and procedures that have been put in place by the management are effective and provide a reasonable assurance that the information provided is reliable (Chaffey, 2007).
For instance, according to the act, the financial information must be processed, recorded, summarised, and reported within the required period. The management requires that such information should be communicated to the executive officer and chief financial officer before its release to the public. Moreover, the management must approve such information and must make decisions regarding disclosure (Chaffey, 2007).
In addition, the information should be released to the public promptly and appropriately. The timely and appropriate release of the information to the public is critical for the users to make suitable decisions.
Even though the firms’ governance performance is good, certain areas need to be improved. As such, the following suggestions are recommended for the firm to make improvements on its governance structure.
On the firm’s governance structure, the organisation should provide more room for shareholders to exercise their voting rights and make considerable contributions in the final decisions. In the current form of governance structure, the shareholders are just stamping on the decisions that have been made.
Even though the organisation has enhanced the welfare of the immediate stakeholders particularly the employees, the views and contributions of policy makers, governments and various agencies should also be taken into consideration. The corporation governance should put in place measures that ensure regulations, contributions and views of the concerned parties are taken into consideration.
The governance board should also review the firm’s relationship with other stakeholders as well as its commitment to provide appropriate services to its users and to act responsibly in communities where it operates in order to avoid fraught problems the firm has been encountering.
In particular, the governance should focus on the observance of individual rights and freedoms. In essence, the individual rights and freedoms should be integrated within the business processes. For instance, in almost all its operating period, there have been concerns on whether the firm’s products infringe the privacy of users.
The governance board should also review its ethical codes of conduct and ensure compliance to the moral obligations of the firm. In fact, numerous violations of ethical code particularly practices regarding the collection, use, disclosure as well as the security of personal information or any other privacy related matters have resulted in the damage of the firm’s reputation and brand image.
The firm should also review the mode of the board’s recruitment and specify the maximum period in which the board should be sitting. In most firms, the selection of board’s members follows a regular periodic pattern, For instance, a maximum of five years in a single term or ten years in double sitting arrangement. Such measures are critical in the prevention of issues concerning conflicting interests, fraud and mismanagement of the firm’s resources.
Chaffey, D 2007, Google case study-covering Google business strategy and technology case. Viewed 10 March 2014,<http://www.davechaffey.com/E-commerce-Internet- marketing-case-studies/Google-case-study/>
Dwivedi, J 2008, Google’s robust strategy and business model. Viewed 10 March 2014, <http://www.iproceed.com/blog/2005/02/googles-robust-strategy-business-model.html>
Farrar, J 2008, Corporate governance: theories, principles and practice, Oxford University Press, Oxford, UK.
Google 2010, 2010 annual report. Viewed 10 March 2014, <http://www.investor.google.com/pdf/2010_google_annual_report.pdf >
Google 2011, 2011 annual stockholders meeting. Viewed 10 March 2014, <http://investor.google.com/proxy/2011/index.html>
Reddy, K, Locke, S & Scrimgeour, F 2010, “The efficacy of principle-based corporate governance practices and firm financial performance: An empirical investigation,” International Journal of Managerial Finance, vol.6 no.3, pp.190-219.
Sharma, U & Reddy, K 2014, “Institutional antecedents of principle-based corporate governance practices: A case study of publicly listed companies,” Journal of Accounting & Organisational Change, Vol.10 no.1, pp.49 – 82.
Tricker, B 2012, Corporate governance principles policies and practices, Oxford University Press, Oxford, UK.