Why Corporate Governance Is an Important Ethical Issue Assignment

Why Corporate Governance Is an Important Ethical Issue Assignment Words: 513

Insert name Insert name of the course supervisor Insert name of the course Insert date assignment is due Why Corporate Governance is an Important Ethical Issue As consumer movements grow stronger and stakeholders become more knowledgeable and aware of company operations, it has become necessary for corporations to come to grips with ethical issues in order to continue surviving in business.

Consumers and stakeholders are becoming increasingly aware of the adverse effects of unethical business practices like low quality products and services, financial embezzlement, disregard for environmental issues and unhealthy working conditions among others. Most companies have realized the importance of upholding virtues like transparency and integrity. It has therefore become necessary to formulate and implement appropriate corporate governance mechanisms. Corporate governance refers to a system by which a company is properly managed by adopting internationally recognized ‘best practices’ of management.

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It involves the company’s commitment values and ethics in order to achieve its objectives, manage risks, and improve performance. Corporate governance ensures that the company’s shareholders, customers, the staff, and investors are all treated fairly in accordance to a code of business ethics. Corporate governance is indeed critical in enhancing and retaining clients’ and investors’ trust (Parker 191). In sound corporate governance, financial integrity plays an important role in ensuring that directors and everyone concerned are open and sincere especially when conflicts arise in financial decision making processes.

A good example is during deliberations about purchasing or procurement procedures where greater transparency is indeed required. However, in an effort to arrive at the best financial or business results, a conflict might arise between moral and legal issues. In such instances the dilemma can only be solved by the corporate governance mechanisms of the company (Clarke 67). A company’s corporate governance determines the way it conducts its business with regard to a code of values and principles. This is what ethical conduct is all about.

The importance of ethics can not be ignored because it is through ethics that a person is able to select a right course of action from a wrong one. Good corporate governance is based on values the company upholds and therefore ensures that ethical dilemmas arising from conflict of interests are avoided. This is because the decisions made by managers are based on laid down principles that are in line with the company’s goals and objectives (Shleifer 737). In conclusion, corporate governance can be summed up as the ethical framework used in management. Corporate decisions are usually made on the basis of this moral or value framework.

It is therefore an important control mechanism that optimizes the management of human resources and the physical and financial resources of the company. It is therefore of outmost importance that every company should formulate and implement corporate governance mechanisms that reflects its code of ethics. Works Cited Clarke, Thomas, and Marie dela Rama. Fundamental of Corporate Governance. ThousandOakes, CA: Sage, 2005. Parker, Jones. For Business Ethics: A critical Text. London: Routlegde, 2005. Shleifer, A. and R. Vishny. A Survey of Corporate Governance. Journal of Finance, 52. 2(1997): 737-783.

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