Please enable JavaScript.

Coggle requires JavaScript to display documents.

Ethics and Governance (Corporate Governance (Corporate Governance Theories…

- - - - empowering/entrusting managers to exercise authority and responsibility will facilitate the maximisation of the organisational financial performance and shareholder value.
      - CEO and chairman to be same person
        
        Role duality Inside directors advocated
        
        Board members act as advisors to Management
      - Limitations
        
        Oversimplified and Unrealistic
        
        Executive behaviour could be opportunistic
        
        Human behaviours are not fixed or unchangeable
        
        Lack of emperical evidence
    - - Maintain and enhance shareholder value and also take into account Stakeholder value.
      - CEO and chairman to be different persons
        
        Outside directors advocated Stakeholder-oriented board
        
        Important role for Nomination Committee
        
        Encourage long-term employee ownership
      - Limitations
        
        Hard to identify legitimate stakeholders
        
        Balancing stakeholder interests is an ill-defined notion
        
        If management is made to be accountable to multiple stakeholders, it may effectively end up accountable to no one
        
        Maximising shareholders’ interests is the sole legal purpose of a firm.
    - - proposes that the firm’s owners (principals) hire managers (agents) and then delegate the firm’s day-to-day operating decisions to these managers.
      - assumes that both parties – owners and managers - seek to maximize their own personal interests
      - the problem of information asymmetry - the principal and the agent have access to different levels of information
      - Limitations
        
        Agency Costs
        
        Too Simplified
- - - - 2.Legitimacy
        
        the desirability and reasonableness in a party’s claim
      - 1.Power
        
        Physical means
        
        Material means
        
        Social means
      - 3.Urgency
        
        Time Sensitivity: the degree to which the delay in considering the claim is unacceptable to the party
        
        Criticality : The importance of the claim to a party
    - - Salience CSR
        
        Discretionary: Likely to be recipients of corporate philanthropy. No pressure on managers to engage with this group, but they may choose to do so
        
        Demanding: Those with urgent claims, but no legitimacy or power. Irritants for management, but not worth considering
        
        Dormant:: Possess power to impose their will through physical, material or social means, but have no legitimacy and urgency
        
        Dominant: Those with powerful and legitimate claims, but no urgency
        
        Dangerous: Those with powerful and urgent claims will be coercive and possibly violent
        
        Dependent: Stakeholders who are dependent on others to carry out their will, because they lack the power to enforce their stake
        
        Definitive: Stakeholders with all 3 attributes
  - - - Less Regulated Workplace: More basic Issues
      - In-house workplace: Their suppliers
      - Regulated Workplace : Go beyond the law
    - - Philanthropic donations to local deserving parties
    - - Ethical Responsibilities: Ensure the market activities offer appropriate benefits to the customers
      - Instrumental responsibilities: Social responsibilities to the extent that is demanded by consumers.
  - - - Economic responsibilities
        Legal responsibilities
        Ethical responsibilities Discretionary/philanthropic responsibilities
    - - any group or individual who can affect or is affected by the achievement of the organization’s purpose
        
        any group or individual who can affect or is affected by the achievement of the organization’s purpose
        
        creating/maximizing values for ALL stakeholders is the right thing to do under various normative ethical theories
        
        any group or individual who can affect or is affected by the achievement of the organization’s purpose
    - - There is one and only one social responsibility of business – that is to make as much money for the stockholders as possible.
      - executive does not have the right to spend someone else’s money
- - - - Moral Management: High standards of ethical behavior: making decisions consistent with moral standards; usually going beyond legal requirements.
      - Amoral Management :Intentional does not consider ethical factors; believes that business and ethics are separate domains, where different rules apply. Unintentional - casual or careless about ethical considerations in business.
      - Immoral Management : Actively negating from ethical principles and oppose to what is ethical
    - - • Ethics applies to all human activities
        • Business cannot survive without ethics
        • It is well-established that ethics is consistent with profit, particularly in the long run (Samsung’s Galaxy 7 recall – ethical behaviour – profitable ?)
        • Employees, investors, and customers care about ethics
        (Manuel, 2006, p 41)
  - - - Formal culture
        
        Selection & Reward Systems
        
        Orientation/ Training
        
        Policies/ Codes
        
        Decision Making Process
        
        Leadership :star: Most Important cuz Leaders can create, maintain, or change formal and informal cultural systems by what they say, do, or support”
        
        Structure: Authority & Responsibility
      - Informal culture
        
        Informal Norms
        
        Heroes and Role model
        
        Stories
        
        Moral language
    - - Moral Person
        
        Telling employees what the leaders will do
        
        Having morally good characterisitcs
      - Moral Manager
        
        Helping employee do the right thing
        
        Setting ethical standard
        
        Holding employees accountable for this standard
      - +Weak person, weak manager = Unethical leader
        +Weak person, strong manager = Hypocritical leader
        +Strong person, weak manager = Silent leader
        +Strong person, strong manager = Ethical leader
  - - - Work Roles
      - Authority
      - Reward
      - Diffusion of responsibility
      - Issues Related Factor - Moral intensity
      - Group norms
      - Organisational culture
    - - Moral Awareness -> Moral Judgement -> Intent -> Moral behaviour
    - - Conventional (Community)
        
        Pleasing other
        
        Rule Follower
      - Pre- conventional (Self Centered)
        
        Avoid Punishment
        
        Self Interest
      - Post - Conventional (Universal Principles)
        
        Just Rules determined by consensus
        
        Self- Chosen ethical principal
  - - - Non- Consequentialist approach (Focus on Duties)
        
        Kantian ethics
        
        Duty to act in a way that could be universally agreed by all people
        
        Duty to treat all persons as ends in themselves and never as means to our own ends.
        
        Justice Ethics
        
        Distributive justice: Fair distribution of benefits and burdens
        
        Retributive Justice: Fairly punishing a person for wrong doing
        
        Procedural Justice: Fairness in allocation in benefits and burdens
        
        Duty Based Theories
        
        Focus on doing what is 'right‘.
      - Virtue Ethics (Focus on integrity of the moral actor)
        
        Focuses on the characteristics of a moral actor rather than the act itself
        
        Morally virtuous characters + Morally bad characters
      - Consequentialist Approach (Focus on the Consequences)
        
        Egoism
        
        an act is morally right if and only if it best promotes an agent/individual’s self-interests
        
        Limitations: The theory assumes that we live among strangers, we do not care for anyone or anything
        
        Utilitarianism
        
        An action is ethically right if the benefits are greater than the harms or Viceversa
        
        Limitations: Too much focus on the end can lead to an overlook of the means. Difficult to measure all consequences. Rights of a minority group can easily be sacrificed for the benefit of the majority.
- - - - Not Transparent
        
        Directors appointed by, and represent for, major/family shareholders
        
        Conflict of interest, as directors are required by the law to represent all shareholders
        
        Nominee directors can potentially obscure the decision-making process in the boardroom because of their own agendas (Mak and Phan 2001).
    - - Minimum agency costs
        
        Less monitoring of management activity
        
        Better protection of shareholders interests
        
        Less driven by the short-term demands
        
        More inclined to focus on the longevity of the firm
- - - - Non-executives are less independent of the management
    - - Non-executive directors have more contact with the company.
        
        Save time for decision making: decisions are taken by a single body, and exchanging information is quicker and simpler
        
        Less administrative burden - only a single body needs to hold meetings and only a single set of minutes has to be drawn up.
  - - - Monitoring supervisory board
        
        Composed of non-executive directors
        
        Oversees the direction of the business and the management board
        
        Make or approve decisions of fundamental importance.
    - - Composed entirely of executive directors
        
        Running the day-to-day operation of the company
    - - Complete separation of the managing role & monitoring role
        
        More clearly defined directors’ responsibilities in each board;
        
        Separated roles of CEO and Chairman (Hampel, 1998)
        
        Allows for more stakeholders to be involved.
    - - The upper-tier directors may lose touch with the company, while the lower-tier directors become distanced from outsiders;
        
        Power imbalance - the upper board is generally more powerful (Hampel, 1998).
        
        If one board is clearly senior to the other - potential conflicts.
        
        Slower decisions