Corporate governance strategy for Emirates Energy Nuclear Corporation Report

Introduction

Emirates Nuclear Energy Corporation is a government agency that has been charged with the responsibility of providing safe, clean, and reliable energy supply to the United Arab Emirates from nuclear sources. Energy is vital to the development of the United Arab Emirates social and economic agendas.

The current power sources may not be sustainable in the long run due to the great energy demand. Energy demand in the United Arab Emirates is increasing at annual rate of approximately 9 percent, a figure that triples the global energy demand average of 3%. The estimated time span of ENEC is to provide power to the nation by the year 2017. Completion is expected to be achieved in the year 2020.

Objectives

Due to the aforementioned reasons, this project will:

  • Examine the corporate governance strategies relevant for the privatization of Emirates Nuclear Energy Commission.
  • To establish the difference privatization will bring to the company in terms of resources and manpower
  • To establish the feasibility of this undertaking in comparison to other companies that manage nuclear transmission such as Exelon in the United States.

Rationale

To be able to set up the infrastructure, ENEC requires substantial amount of resources. Such projects also require excellent management skills to be undertaken successfully. The government may not provide the required resources adequately. This therefore calls for the involvement of the private sector. To avoid conflicts between the two sides, it is sensible to privatize the company i.e. reduce government influence significantly.

An example of a private company that has achieved success in providing nuclear energy is Exelon Company in the United States of America. The company deals with generation, transmission and delivery. The company supplies energy in 47 states and it further extends to Canada and Columbia. Its success lies in being the largest power generator with 34, 700 megawatts of power.

It also supplies electricity to over 6.6 million clients in the United States. The company recorded operating revenues of approximately $ 23.5 billion in the year ended 2012. The success of this company is also another factor that has prompted the study of the possibility of transforming Emirates Nuclear Energy Commission from a state owned firm to a private firm.

Procedures

Information for this project will be gathered using qualitative means. Qualitative means in this case will focus on published material. To establish the objectives, data will be gathered from various online sources notably, the websites of the two companies. Information will also be gathered from various texts. The gathered data will then be processed i.e. coded appropriately.

Intent of the Project

This project aims to examine the corporate governance strategies that can be employed by the Emirates Nuclear Energy Commission to achieve sustainable growth. This includes the proposed change of ownership and control i.e. from being privatization. This will be through examining corporate governance strategies that may work for the company. The project will examine various matters that form corporate governance, strategic management and planning. A conclusion will then be made based on the study of the above aspects.

Corporate Governance

Corporate Values

Emirates Nuclear Energy Commission being a corporation, it should adhere to the principles of corporate governance. These principles deal with corporate matters such as code of conduct, professional ethics and general personal behavior. The key values of corporate that should be considered by the management and staffs of corporations include integrity, dependability, performance status, accountability, reputation and the dedication of the company towards attaining set goals and commitment. The company employees for the good of the organization should uphold these values. It is evident that a government due to various factors such as political influence and limited resources cannot achieve the above values comfortably.

The Principles

Principles of governance are spread over a range of company issues. In the case of ENEC, the company is to be privatized therefore the management should focus on the principles regarding treatment of shareholders.

The relevant principles require the company to set up a platform for the development of an efficient corporate governance framework, recognize the rights of shareholders and distribute shareholders roles, treat shareholders equally, appreciate the roles of stakeholders in corporate governance, and provide relevant information with due diligence.

Setting up of a Corporate Governance Structure

Being a corporation, the management of ENEC should have in place an effective corporate governance structure. This means that the code of conduct, charter and other articles should reflect excellence in corporate governance. Training and development mechanisms should also be designed in a manner that allows for organizational growth and success.

The rights of shareholders and key ownership functions

Currently, the Emirates Nuclear Energy Commission is fully owned by the government of the United Arab Emirates. This means that all key ownership functions are conducted by the state. After privatization, the management will have to consider the rights of the incoming shareholders. For the company to be run effectively, all necessary information that should be made available to the shareholders should be availed at appropriate times such as at the annual general meeting.

Equitable treatment of shareholders

This principle aims at protecting minority shareholders. All shareholders should be treated equally by the organization. This is key and mandatory therefore the management of Emirates Nuclear Energy Commission should consider it. Equitable treatment of shareholders helps to create investors confidence that may come in handy when the company will be seeking more funds for expansion and other related projects.

Role of stakeholders in corporate governance

After privatization, there are likely to be more than one shareholder in the company. It is vital that the numerous shareholders be involved in the decision making process of the company. This is in an implied and stated law of the agreements therefore the board and management should uphold it.

Disclosure and Transparency

For privatization to be effected, the current management of the organization should take considerable care and reveal all the information necessary for the transaction to be effected. The private company afterwards is also required to do the same to the shareholders. The shareholders should have free access to relevant authentic information regarding the operations of the company. For instance, Exelon Company in the United States has been able to achieve success due to its transparency in disclosing information to its shareholders.

The Responsibilities of the Board

The organization should have an established corporate governance structure that will identify the roles and responsibilities of the board, management and other stakeholders. Among the things that should be outlined is the power of the management to avoid contradictions that may arise. It is vital to consider the powers of the stakeholders before the company makes any major decision.

Ethics and Behavior

An effective risk management programme requires an ethical and dependable decision making platform. All employees and stakeholders should adhere to the code of conduct strictly after implementation. This should be considered to ensure that the organization do not deviate from its moral and official limitations and obligations.

Strategic Management Responsibility

Strategic management revolves around three aspects that are the corporation, board of directors and corporate governance.

The corporation: The Emirates Nuclear Energy Commission like other corporations, it has an established mechanism that allow raising of capital and improving manpower through various means such as through the proposed privatization. Capital is provided by shareholders who will invest in the company individually or as groups. The work force includes the staff and management who provide labor and expertise for the company. The aim of corporate governance will be to protect the weak especially minority shareholders.

Corporate governance functions will require three parties: shareholders who will be the owners of the company, directors who will ensure that the company assets are not misappropriated, and managers who will use the company assets to carry out company functions.

Furthermore, as required by corporate governance regulations, the company will uphold excellent board ethics, provide a controlled environment for company affairs to be carried out, always disclose relevant information in a transparent manner, ensure the shareholders rights are respected, and it will ensure that the board is commitment to achieve success.

Furthermore, the company will ensure adherence to acceptable board practices such as establishing guidelines that will define the roles and authority of the management, ensure that each member of the board and management understands his/her roles to avoid conflicts and ensure that the composition of the board is sound and there is a mixture of skills.

Change of Ownership: Change of ownership and control of organizations creates confusion and agency problems if not handled well. This occurs especially when the new owners start to embark on new ventures that were initially not being pursued by the company.

Board of Directors

The board will be selected by the shareholders to represent the shareholders interests. In the strategic management process, the board has various functions such as

to monitor the development of the company and the influencing factors both within the company and outside the company, to act as advisors to the management on matters that may have been overlooked, and to evaluate the management’s proposals, decisions and actions and take the relevant decision i.e. agree or disagree. The board will also offers strategic advice to the company on matters that affect the company’s mission and vision.

The organization’s articles and bylaws will determine the composition of the board. There will be emphasis on separation of functions to enhance performance within the organization. Members of the board will include directors employed by the company and directors who may be employees of other entities, or people with interests in the company.

As a modern entity, the formed company will also embrace the modern trends in the composition of board of directors such as the inclusion of institutional investors in the board of directors. There will also be provision for ownership of stock by the executives and directors of a company. Furthermore, the board will be more inclined towards balancing the economic goals of the company and the social needs. For instance, Exelon takes part in many corporate social responsibility activities to the communities that receive their services.

Top Management

The Chief Executive Officer will head the top management. The Chief Operating Officer, Chief Financial Officer and executive vice presidents will assist the Chief Executive Officer where applicable.

The top management will handle the strategic role of the company, as this will form its primary role. The role of the management will include making day-to-day decisions within the company and overseeing the daily activities. They will also offer strategic leadership i.e. think strategically and influence the other workers in creating a sensible future for the organization.

The functions relevant for the strategic management of the company will include designing strategic options for the company, act as role models for the other people in the organization to follow, and to enhance the performance of the organization by coordinating and integrating the functions of the various departments in the organization. The top management will also be directly involved in the handling of stakeholders.

Handling of stakeholders will be done based on the various principles that govern the management-stakeholder relationship. These are the management should respond to the concerns of shareholders i.e. their voice should also be heard during decision-making, the management should also implement policies that cover the concerns of stakeholders. The stakeholders should therefore find the practices easy to work with incase they want to air their grievances or contributions.

Moreover, the management will adopt mechanisms that will address the concerns of the shareholders irrespective of where they are located, appreciate the relationship between the efforts and rewards of the stakeholders i.e. there should be fair distribution of burdens, rewards and risks among the stakeholders.

The managers will also ensure good working relations with other entities with an aim of minimizing risks. Risk management in this case tries to reduce the effects of risks in case they occur. There will be avoidance of activities that may jeopardize the company’s relationship with the stakeholders. Managers will also appreciate potential conflicts that may arise between (a) amongst themselves as corporate stakeholders, and (b) between the managers and stakeholders in view of legal and moral obligations that exist between them.

Strategic Planning

A strategy is a future: oriented plan practiced at a large scale. The strategies will help in the achievement of company goals through interaction with the environment within and outside the organization and in setting the platform for managerial decisions to be made and implemented. Moreover, the strategies will help on testing the readiness of the company in dealing with competition.

Strategic management will help in setting decisions and actions that will help in the achievement of the company’s objectives. Strategic management will also be vital in areas such as formulating the company’s mission, conducting SWOT analysis, assessing the environmental factors, evaluating the preparedness of the company with regard to other external factors and in decision making with regard to achieving the company’s mission.

Conclusion

The above strategic measures are necessary for ENEC to achieve success like Exelon. However, to achieve the above substantial resources will be consumed by the company in terms of work force and funds. There is great demand for energy in the United Arab Emirates that if well harnessed, could be a potential source of profits for the company.

The most suitable step will be for the company to privatize their operations due to the perceived benefits it may gain. Furthermore, as indicated earlier government commissions are affected by politics thereby affecting their operations.

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