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M6 Part A: Corporate governance p.391 (Identifying Stakeholders p.395…
M6 Part A: Corporate governance p.391
Definition
Corporate governance
System by which business corporations are directed and controlled
Efficient use of recources
ASX Corporate Covernance Principles and Recommendations
Lay solid foundations for management and oversight
Structure the board to add value
Act ethically and responsibly
Safeguard integrity in corporate reporting
Make timely and balanced disclosure
Respect the rights of security holders
Recognise and manage risk
Renumerate fairly and responsibly
Corporate Social Responsibility
p.392
Based on the idea that bis activities should protect and benefit the natural environment and society
sustainable
fairly
viable
liveable
Governance = Performance + Conformance
The distribution of rights and responsibilities among the board, managers, shareholders and other stakeholders
Corporate Social Responsibility p.392
Milton Friedman: Traditional view
Focus on profit
CSR
Identifying Stakeholders p.395
Contracting theory
p.395
orga is characterised as a legal nexus of contracts
Contracts are used to mange relationships
Agency Theory
p.395
Agency exist for the benefit of their owners
Relationship between Agents and Principals
Assumes Agents have power and information, and are acting selfishly
Agency Costs
Attempt to establish
goal congruence
Monitoring
Costs to review and supervise agents
Principals bear costs
Bonding
Agent tries to show they are goal congruent
Agent bears bonding cost
Residual Loss
Difference between perfect goal congruency and what has actually been achieved
Born by the principal
Institutional Theory
p.397
Considers how rules, norms and routines become established
Key assumption that all participants seek legitimacy within the institutional environment
Legitimacy Theory
p.397
Social contract to operate
Operating in accordance with the expectations in the social contract
Take genuine action
Change perceptions
Deflect attention
Change evaluation process
Contingency Theory p.399
No universal best way to structure or act as there are different factors affecting orgas
Stakeholder Theory p.400
How do we manage the different stakeholders
Considers the relationship with discrete stakeholders rather than society as a whole
Balancing Stakeholders interests p.401
Stakeholder Management as a compromise
p.401
Allowing decisions to be made and work to be done free from the presence of stakeholders
Assessing info and demands from all stakeholders ina holistic and connected way
Oversight carried out by a diverse set of interests to challenge decision makers and hold them accountable
International perspectives and developments
p.407
Europe: more direct recognition of alternative stakeholders, emphasis to employee
Extend good corporate governance to small biz: attracht investment and family dominance and scandals in such businesses