The top management has various responsibilities, which determine the company’s future. It may be seen as a leading force accepting all the outcomes of their decisions. While strategic planning is one of the management’s critical functions, the most important part is that it should be made primarily concerning the financial state of the business.
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A top management team is responsible for decisions on the course taken by a company. Thus it is their task to ensure a business is successful both in short and the long run. It is crucial for company leaders to undertake the responsibility of guidance, for they are usually the ones who know all processes of a corporation and may draft a decision better than managers specializing only in one field. Its functions, among others, include the analysis of strategic plans and offering goals and solutions based on them. The most used scheme for setting goals is the “top-down approach” (Roth, 2015, p. 6) when a group responsible for planning submits its findings to the top management for them to study the results. Although this approach has its downsides, strategic management proves to be effective regarding the company’s development based on various examples.
The board of directors has different functions, the primary of which include developing the strategy for the further growth of a company. It acts on behalf of stakeholders in order to put the skills and knowledge into creating the steps which a business should take to succeed. Other functions include financial reporting and managing budgets. According to Monahan (2016), many boards of directors nowadays “become far more focused on minimizing risks than on seizing the opportunity” (p. 3). The author mentions the case of the Enron company, which was affected by a scandal of shady financial schemes. The corporation’s board of directors had failed to conduct a proper budgeting system and was accused of hiding the real incomes. All the investors turned away from the business, and Enron was forced to go bankrupt in 2001. There is no surprise, taken into account such pressure, which management tries to eliminate possible risks rather than target at the development.
The mentioned case, along with the several other loud corruption scandals, forced the government of the USA to pass the Sarbanes-Oxley Act. This act consists of the eleven sectors of business and management control and sends a message that the government “would not tolerate damage to the public’s confidence and undue financial loss to shareholders from fraud in publicly traded companies” (Wilbanks, 2016, p. 23). The act’s purpose is to implement the new way of companies’ financial control and to make easier the process of revealing information to shareholders. Nowadays, every publicly traded company must have the audit committee, which usually consists of the board members. The time periods, during which businesses should present the financial information, have shortened, and this sometimes causes problems for management. Making a financial report is not a fast process, and it requires the input of several structures within a company to create it.
One of the most progressive steps in today’s management can be seen in the concept of the strategic audit. It not only helps to understand the current financial state of a company but may provide an insight into whether the current strategy will be effective in the long run and thus determine the ways for possible improvement. The strategic audit is useful for corporate governance since it helps top management to determine the path that must be taken by their company. It may create an attractive picture of business for investors and result in growing profits.
Roth, W. F. (2015). Strategic planning as an organization design exercise. Performance Improvement, 54(6), 6-12. Web.
Monahan, T. (2016). Your company needs a more-radical board of directors. Harvard Business Review Digital Articles, pp. 2-4. Web.
Wilbanks, D. (2016). The Sarbanes-Oxley Act. Professional Safety, 61(2), 23-25. Web.