DB corporate Goverance

 

1. I enjoyed reading your post for this week’s discussion. You said, “The critical learning on corporate governance is that, in most organizations, the board members oversee the company’s affairs. The shareholders usually appoint the board members to manage the company’s operations.” Board members are indeed the watchful eye on the performance of the top managers, may that be CEO’s or Executive Directors. But, as Hoskisson notes, board members or the board itself face greater scrutiny these days, especially those of larger corporations, and that it is a trend to bring in a more diversified group to make up the board to govern (Hoskisson et al, 2013). Financial scandals like Enron resulted in Sarbanes-Oxley and Dodd-Frank regulations. Do you believe that a more diversified board – different backgrounds, education, cultural, ethnicity – would increase the strength of of a board of directors, where everyone can bring something to the table, or would it negatively impact the financial oversight and accountability if too many outsiders are a part of the board?

Thanks for sharing your thoughts with us this week.

Best,

Susanne

Reference:

Hoskisson, R., Hitt, M., Ireland, R.D. & Harrison, J. (2013). Competing for Advantage (3rd ed.). South-Western Cengage Learning: Mason, OH.

  2.  Corporate Governance as described by the book is “the set of mechanisms used to manage the relationships among stakeholders and to determine and control the strategic direction and performance of organizations.” (1) From what I gather from the book as well as the article Corporate Governance in Emerging Markets … and Everywhere Els this is maintaining ethics, morals, and how CEO’s and top-level management maintain roles, expectations and ethical standards and their interactions with stakeholders. I believe Dow Chemical does a great job when maintaining clear expectations and communication with investors and stakeholders. Quarterly earnings reports are published which allows them to know exactly where the organization stands. There are also endless press releases published by the organization to let the world know where they are at as far as sustainability, safety and inclusion. While I may not personally agree with everything Dow does (I mean who has a job where they agree 100% with everything) I do believe they are working towards their CEO playing an ethical and moral role not only with investors but also with employees and the world outside of work. The article talks about how the responsibility of the CEO goes beyond the success of the organization’s bottom line but also the culture. Jim Fitterling is actively working towards a more inclusion environment. New clubs and organizations within Dow have been created to make those from different backgrounds, sexual orientations, and religious beliefs feel heard and understood. This type of corporate governance is creating an environment where not only Dow employees and contractors feel safe to be who they are but more organizations across the globe feel comfortable working with Dow as well. 

Referenced
1. Hoskisson, R., Hitt, M., Ireland, R.D. & Harrison, J. (2013). Competing for Advantage (3rd ed.). South-Western Cengage Learning: Mason, OH.  
2. 

Berenbeim, R. (2011, December 1). Corporate Governance in Emerging Markets …  and Everywhere Else. Vital Speeches of the Day. 

  3. In Chapter 11 of Robert E. Hoskisson’s “Competing for Advantage,” I found the key learnings to revolve around the importance of corporate governance in shaping and sustaining competitive advantage. Some key points discussed were; Role of Governance Structures, Board of Directors, Executive Compensation, and Shareholder Activism. Hoskisson emphasizes the role of governance structures in aligning the interests of various stakeholders, including shareholders, management, and employees, towards the common goal of creating value for the organization. The chapter also goes on to discuss the significance of an effective board of directors in overseeing strategic decisions, providing guidance to management, and ensuring accountability. Chapter 11, breaks down executive compensation and how it influences managerial behavior and organizational performance. It further explores best practices for designing compensation packages that incentivize executives to act in the long-term interests of the company. Finally, I found the insights into the role of shareholder activism to be the influence of corporate governance practices and driving improvements in transparency, accountability, and sustainability.

From our reading “Corporate Governance in Emerging Markets and Everywhere Else” by Ronald Berenbeim, I found many key learnings to be intriguing like Global Governance Trends, Challenges in Emerging Markets, Importance of Transparency and Disclosure, and Regulatory Frameworks. Berenbeim discusses global trends in corporate governance, highlighting similarities and differences between emerging markets and developed economies. The article goes on to address specific challenges faced by emerging market companies in implementing effective corporate governance practices, such as weak legal frameworks, lack of investor protection, and cultural differences. Berenbeim further emphasizes the importance of transparency and disclosure in enhancing investor confidence and attracting capital in both emerging and developed markets. He goes on to explore the role of regulatory frameworks and institutional investors in promoting good corporate governance practices globally.

When it comes to corporate governance in my organization (logistics industry), we typically have mechanisms or relationships that we rely on. We have many of the above key elements, so we to rely on our boards oversight for strategic guidance so that the company’s operations align with its long-term goals and interests of stakeholders. With that said, we also engage with our stakeholders, including customers, suppliers, employees, and local communities, which can help us understand their needs and expectations, leading to better decision-making and risk management. We’ve also Implemented a robust risk management process and internal controls for mitigating operational, financial, and reputational risks inherent in the logistics industry. We do our best to foster a culture of ethical leadership and corporate responsibility to enhance trust among stakeholders and safeguard the company’s reputation. Finally, we’ve established clear performance metrics and accountability mechanisms to incentivize management in prioritizing value creation and operational excellence while maintaining transparency and accountability.

References: 

Hoskisson, R. E. (2013). Competing for advantage. South-Western Cengage Learning. 

Berenbeim, R. (2011, December 1). Corporate Governance in Emerging Markets and Everywhere Else. StudyDaddy.com.  

4. My key learnings from Chapter 11 are how corporate governance is responsible many things within an organization, namely accountability, ethical conduct and transparency. Another key learning that I walked away with was how important it is for directors to fulfill their responsibilities in both the legal and ethical aspects of their role.

As for the Berenbeim reading, I learned more about some of the roles that corporate governance plays within an organization, such as their focus on compliance systems and risk management, as well as combating corruption in newer markets. Another takeaway of mine was that there are indeed some difficulties in implementing corporate governance within an organization, one of which being the fact that there is not an exact or universally accepted definition of corporate governance.

Regarding how this concept applies to my organization, we have our core members that are the primary decision-makers, and this intended to guarantee clear leadership within LaffySmash. Moreover, we have our secondary members that take care of specific tasks like managing the stream for our events. The main mechanisms that are effective are our clear leadership and decentralized approach to governance. These mechanisms allow us to effectively utilize everyone’s skillsets while efficiently executing all the tasks that are necessary for our tournaments to run properly.

References:

Hoskisson, R. E. (2013). Competing for Advantage. South-Western Cengage Learning

.  5. Corporate governance is an interesting concept to discuss for this week when you put into perspective the question Berenbeim proposes in his article, “who watches the watchers?” (Berenbeim, 2012, pg. 60) I found this question to be very intriguing because of the proposition it places the concept of corporate governance, it reveals the reality that it is a question that we can continue to ask ourselves. Now, I am suggesting that perhaps we may have a board of directors or third-party accountants to monitor our companies, but I raise the same question again – who will watch them? Hoskisson writes, “Thus, corporate governance reflects and enforces the company’s values.” (Hoskisson, 2012, pg 321) I think it is important to emphasize the values and standards of the organization because they are reflected by the decisions they make in their daily function. Berenbeim touches on this topic when he defines Moral Hazard occuring, “when “the individual’s perception of either the cost or the benefit of the activity differs from its cost or benefit.” (Berenbeim, 2012, pg. 61) The key learning from the reading is that Berenbeim acknowledges the importance of oversight and the continual effort to refocus on corporate governance to find sustain success. While Hoskisson in Chapter 11 shared the insights corporate governance can create for emerging markets and international business.

D.R. Horton has a corporate governance structure that is represented by a board of directors. The board of director in place our tasked with the monitoring and oversight of the top executives of the company. They are elected each year by stockholders during an annual stockholders meeting. They utilize the mechanism of related outsiders as a way to capitalize on an overall competent understanding on the business model and the execution of good business practices. It appears to be particularly effective in recent years as they have been able to develop a market power by acquiring other competitions to bolster their portfolio as the number one builder in America.     

6. Corporate Governance is defined as, ” … the set of mechanisms used to manage the relationships among stakeholders and to determine and control the strategic direction and performance of organizations” (Hoskisson et al, 2013, p. 321). There are numerous takeaways from this chapter. For example, the internal governance mechanisms used to control managers, namely ownership concentration, board of directors, and executive compensation, and market for corporate control as an external mechanism (Hoskisson et al, 2013). With that, the separation of ownership and management highlighted not only a familiar relationship between both, but also showed that family-owned companies as they grow might potentially outgrow their ability to properly govern through an owner and will have the need to find managers – ‘decision-making specialists’ – from the outside to help with the complexity of a growing firm (Hoskisson et al, 2013). Such separation can also cause issues if managerial opportunism, a conflict of a manager’s self-interest with the owners’ or shareholders’ interest, occurs, especially in large companies where shareholders do not have direct access to the managers (Hoskisson et al, 2013). Risk management is also key in the owner-managerial control relationship, as shareholders not only buy stock for financial gain, but also have to assess and manage the financial investment risk. I also found it interesting how corporate governance varies in different countries and why, from cultural influences to defense mechanism against corruption.

Berenbeim eludes in his speech about corporate governance in emerging markets in Buenos Aires to the different types of corporate governance in different countries. An Emerging Market is an economy that, ” … experiences considerable economic growth and possesses some, but not all, characteristics of a developed economy” (CFI Team, n.d.). As these markets grow, they are not only open to growth, but also to volatility. Berenbeim describes the corporate governance in emerging markets like Asia or Russia for example as a tool to fight corruption (Berenbeim, 2012). He also demonstrates – the lack of – ‘optimal control of managerial discretion’ with the example of Enron, where the board deliberately turned a blind eye toward manager control and allowed its CEO to engage directly in dubious financial relationships and investments (Berenbeim, 2012). As a result ,US Congress passed Sarbanes-Oxley (SOX) and Dodd-Frank regulatory reform laws.

When it comes to my agency, which is a governmental non-profit, I would say that the Board of Directors and Compensation are the most effective internal mechanisms we have. In our case, the board consists of citizens that are appointed by the county commissioners for a three-year term. Our Executive Director is hired by the full board, and also has to get approval through majority vote. This ensures that there is no favoritism, or that a director could ‘buy’ a board member. Hoskisson notes that some managers have been suspected to use their power to ” … select and compensate directors in order to exploit their personal ties with them” (Hoskisson et al, 2013, p. 331). Our director is the agent to our shareholders (elected citizens), and she cannot share the board chair and CEO title. That is separated. Her salary is the incentive to keep her representing the board’s interest. There are things that went wrong with the relationship between the previous Executive Director and the Board that resulted in a ‘rogue’ director (a bit similar to the Enron case as far as the board turning a blind eye towards the director’s accountability of actions), which would have merit to explore further as to why.

DB corporate Goverance

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