CORPORATE GOVERNANCE

Corporate Governance

Corporate Governance

Transparency is imperative with respect to corporate governance due to the crucial nature of reporting financial information to maintaining investor and consumer confidence. The lack of devotion to corporate governance policies will send the message that the company is unbalanced and the leadership is not incorporating the highest level of integrity with change initiatives. The importance of integrating financial reporting, auditing processes, developing clearly outlined information on the roles of the CEO and board of directors is part of the transparency philosophy that can impact any organization. McBride Financial Services must develop and implement a corporate governance system that will not only satisfy the organizational objectives, but also the stakeholders as well.

In order for Hugh McBride, the CEO of McBride Financial Services, to alleviate potential problems a well thought out plan needs to be implemented to sustain the business for longer-term with capabilities of becoming financially stronger. The leadership within an organization has to maintain a corporate culture that integrates ethical decision making approaches to stick to corporate governance rules. Additionally sustaining a balance of power between the executive management including the CEO and the board of directors is crucial for reinforcement of stability in the corporation.

Ensuring that corporate governance is being included in all procedures at McBride Financial Services, Hugh McBride has to set the tone by ensuring that the Sarbanes-Oxley Act (SOX) is being upheld, which can be interpreted by stakeholders as strength and stability of the corporation. Because publically held companies have to comply with this law, ensuring that his executive management has a thorough knowledge of this mandate and other governmental regulations can avoid problems with compliance.

Corporate governance practices constantly evolve to meet changing conditions. As a work-in-progress, there is no single universal model of corporate governance. Also, something worth noting is that the structure in corporate governance varies from corporation to corporation. Therefore, experimentation and variety should be expected and encouraged. In addition, corporate governance tends to vary as a function of ownership, business circumstance, competitive conditions, corporate life cycle and numerous other factors. (Millstein et al, 1998)

It has been investigated that effective corporate governance involves a multi-faceted set of activities, which involve institutional investors, insider and outsider board membership and equity ownership, board committees, the market for corporate control, and so on (Keasey and Wright, 1997).

The problem of corporate governance arises when ownership and control are separated, for instance between shareholders and managers. The owners bear the residual risk and receive residual rewards. Unlike the owners, the managers control the decision-making process and therefore make all the decisions, which influence those risks and rewards. Since the managers and the owners may have different objectives and the owner is likely to lack complete information about the behaviour and decisions of the manager, the "agency" problem occurs. As an attempt to solve the problem, the "principal", the owner, has to seek an efficient way to ensure that the "agent", management, acts in the principal's rather than the agent's best ...