Corporate governance and corporate social responsibilities are competitive advantage strategies that focus on the social, economical, and political improvement of society/community where organizations operate (Moon, 2001). This paper discusses how corporate governance and corporate social responsibilities affect economic, social, and financial elements of organizations and their stakeholders.
Corporate Governance and Stakeholder
Corporate governance and corporate social responsibilities are central to the success and effectiveness of organizations; when making decisions, leaders should consider the social, economic, financial, and political effect of the decisions; timely, effective, and responsive decision should ensure continued improvement of the above considerations.
When conducting business, organizations affects their habitats environment positively or/and negatively; modern strategic management puts emphasis on improving business-environment relationship where emphasis is on corporate governance and corporate social responsibilities.
Stakeholders
There are numerous stakeholders that are affected by corporate governance, they include the target markets, the community of which the organization operate, government, employees, tax authorities, potential investors, environments, and shareholders.
The holy trinity of good corporate governance is the notion of shareholders’ right to question board/ management decisions, transparency and board’s full accountability for their actions. This is ethical behaviour in its true sense (Rasmussen, 2005).
Strengths of corporate governance
Transparency and accountability force management and the board to be disciplined and ethical in everything they do. Therefore, ethical boards and management are high in effective corporate governance.
There is a direct link and positive correlation between a company’s competitiveness and financial performance on one hand and the effectiveness of its corporate governance and its ethical behaviour on the other hand. Organisations that adhere to corporate social responsibilities and corporate governance build customer confidence that facilitate business and boosts its competitiveness (Machan, 2007).
Reform of Corporate Governance
In contemporary business environments, there is need for management to keep changing their corporate governance model to fit the demands of the market. When companies have embarked on CSRs, they have no option than considering ethics and good governance in their business, when these two have been attained, then future disasters are likely to be prevented.
In line with CSRs operations, companies make efforts geared toward social enabling efforts like developing infrastructures, providing primary health care, developing education systems among others in developing countries. In wakes of disasters, the company will be ready to assist. Corporate governance and CSR projects should be aimed at improving the operating environment.
Internally, it will also aim at making operations safer and enhancing disaster recovery. These efforts will not only benefit community and environment but also enhance the organization image, thus increasing business.
Corporate social responsibility manager establish frame works to enhance compliance with internationally recognised CSR standards like Triple Bottom Line (TBL), People, Planet & Profit (3Ps strategy); if companies can be genuine and embark on CSR supported by ethical business and good governance, then the world can stand free of disasters, resulting from companies operations (Jones, Parker and Bos, 2005).
In contemporary business environment, there is need for organizations to enact policies that focus on corporate governance and corporate social responsibilities.
Corporate governance and corporate social responsibilities involve the manner in which companies are managed to create and distribute increasing value to its stakeholders; the policies include the structure of the board (audit, nomination and compensation committees), management/board relationships, carrying out value creating activities, shareholders ‘ rights, record keeping, information disclosures and management compensation and its disclosure.
References
Jones, C., Parker, M. and Bos, R.,2005. For Business Ethics : A Critical Text. London: Routledge
Machan, T. R. ,2007. The Morality of Business: A Profession for Human Wealthcare. Boston: Springer.
Moon, C.,2001 Business Ethics. Boston: Springer.
Rasmussen, L.,2005. Ethics expertise: history, contemporary perspectives, and applications. Boston: Springer.