Corporate governance, the Enron scandal, WorldCom, Arthur Anderson, ethics, proper business conduct, the Sarbanes-Oxley act
When seeking to define exactly what corporate governance is, it is likely that an individual will come across a number of terms and ideas all in a single sentence. For example, one website defines it as "a term that refers broadly to the rules, processes, or laws by which businesses are operated, regulated, and controlled. The term can refer to internal factors defined by the officers, stockholders or constitution of a corporation, as well as to external forces such as consumer groups, clients, and government regulations".
[...] Corporate governance creates a structure in a company that keeps it effective, honest, and allows it to achieve its purpose. Without such a structure, a firm would fall into decay and would not be competitive against firms that do place corporate governance philosophies at the forefront of their business. When a business executive is well versed in the ideas of corporate governance and appreciates the importance of maintaining positive and healthy relationships with all related segments of the business, he or she is much more likely to see that business succeed. [...]
[...] When we think of corporate governance, it is important to visualize this term as it relates to ethics, proper business conduct, and the management of an organization that is honest and effective. Many organizations and individuals are under the impression that in order to make money and be successful, it is necessary to break the law or engage in improper conduct. It is this mindset that leads to corporate scandals such as Enron and Worldcom. Essentially, following the ideas and principles of corporate governance allows a business or an individual to succeed while following the law and maintaining the company code of ethics. [...]
[...] The other company, which invested in the fleet, will now be in a position to acquire new clients, and it will also be praised for its honesty and consideration for the environment. In this example, the ideas of corporate governance were followed by the second company and not the first, and we see direct benefits as a result of this in the long-term. From a competitive standpoint, the company with an eye towards corporate governance is much better off. Many wise and influential economists proclaim the ideals of corporate governance and agree that it is an essential principle that keeps our businesses running successfully. [...]
[...] Corporate governance is essential to competitive success because the principles of corporate governance eventually weed out the companies that are dishonest, unethical, and unwilling to do things by their own set of rules and principles. Let's say, for example, that there are two companies. One company decides that in order to save costs, it will dump toxic chemicals into a river and not report this information to stakeholders or anyone else. In other words, the company decides to break the relationship of trust with other parties that depend on the organization in order to slash costs. [...]
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