Business Governance In An Industry 12 ✓ Solved

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BUSINESS GOVERNANCE IN AN INDUSTRY 12 Business Governance

Business governance is essential for the success of the accounting industry and other industries. It encompasses a collection of processes, practices, rules, and policies that company executives or boards use to control and direct a corporation. This paper discusses the components of an effective governance plan, its political and moral implications, and its relationship with organizational integrity, issues, solutions, and implementation.

Major Components of a Business Governance Plan

A governance plan is a set of processes, roles, and responsibilities that guide the development and implementation of best practices. Typically, governance plans comprise proper definition, clear vision and strategy, participants and clear division of responsibilities, rules, policies and procedures, communication strategy, and shareholder organizations. An effective governance plan requires a clear definition and efficient structure. The accounting industry needs a foundational definition of governance and its purpose of aligning executives' behavior with their best interests.

The mission statement and business strategy should guide all participants towards a common goal. The plan also defines organizational culture and core values. An effective governance plan should have a structural design that includes rules and policies outlining individuals' roles and responsibilities. Accountability is a vital element of good governance, and directors should be accountable for their actions (Ali, 2015). The board is responsible for making decisions, monitoring goal attainment, and identifying and mitigating potential risks. Proper governance should involve shareholders in decision-making and other critical aspects of the business.

Moral Underpinnings

Moral principles are crucial in corporate governance to ensure positive relationships with society. Ethical structures, positions, and regulations are essential for promoting moral choices. The degree to which business decisions reflect moral principles and values is key to long-term success. Achieving and maintaining successful business operations requires organizations to manage risks, including transparency and integrity risks, to protect their reputation. Integrity is a valuable asset in promoting trustworthiness and is a core role of board members.

Boards make decisions that affect stakeholders at all levels. For instance, Enron's failure to adhere to moral standards led to significant scandals, showcasing the importance of ethical decision-making (Edel Lemus, 2014). Good governance depends on the board's ability to build trust and restore confidence through legal, ethical, and moral compliance mechanisms while mitigating risks.

Political Implications

Business governance must consider potential political ramifications. A governance plan must adhere to laws and regulations, like the Sarbanes-Oxley Act, which aims to protect investors from fraudulent practices (Chang and Choy, 2016). Political influences shape corporate decision-making, as power dynamics play a significant role in board policy formation (Nordberg, 2009). The board executes all business affairs, including voting on crucial matters that can guide shareholder involvement.

Organizational Integrity

Integrity is paramount to achieving good corporate governance, particularly in the accounting sector where malpractices are common. Organizational success depends on demonstrating a high level of integrity by adhering to rules and regulations. Leadership should set ethical standards to model behavior for the organization (Huberts, 2018). This alignment of management systems with company values informs all practices and helps build trust with stakeholders.

Issues Resulting from Lack of Organizational Integrity

A lack of integrity can lead to organizational cynicism, significant financial losses, and legal penalties. Corporate misconduct, such as in the Enron case, underscores the need for ethical practices to avoid reputational damage and loss of stakeholder trust. Managers and employees should act in ways that satisfy ethical standards to uphold integrity.

Application of Established Practices to Solve Issues

Organizations can mitigate misconduct by fostering a culture of openness and trust. Conducting anonymous surveys can help organizations understand employee concerns and perceptions (Pope, 2015). An effective organizational culture encourages employees to report unethical behavior without fear of negative consequences. Ethics codes should be integrated into daily corporate practices rather than treated as mere formalities.

Factors Affecting Successful Implementation

Ineffective corporate governance can hinder successful practice implementation. Many organizations fail to follow recommended rules due to lacking good governance plans, and resistance to change often stems from poor communication and fear of failure. Addressing these issues requires active leadership that promotes integrity and inclusivity within the organization.

Solutions to Impediments

Active leadership is crucial for implementing practices that foster integrity. Ethical leaders should balance personal and business integrity, and organizations need to establish supportive environments that inspire all members to embrace ethical change (Tiller, 2011). Proposals should be integrated into business strategy and offer opportunities for employees to participate in decision-making processes.

Conclusion

An effective business governance plan is critical for achieving corporate success. Properly defining governance helps guide managers to make the right decisions without external influences. Organizational integrity, bolstered by ethical guidelines and transparency, fosters positive relationships and teamwork amongst stakeholders.

References

  • Ali, M. (2015). Governance and Good Governance: A Conceptual Perspective. Dialogue, 10(1). DOI: 10.5296/jpag.v9i3.15417
  • Chang, H., & Choy, H. H. (2016). The effect of the Sarbanes–Oxley Act on firm productivity. Journal of Centrum Cathedra.
  • Edel Lemus, M. I. B. A. (2014). The financial collapse of the Enron Corporation and its impact on the United States capital market. Global Journal of Management And Business Research.
  • Huberts, L. W. J. C. (2018). Integrity: What it is and Why it is Important. Public Integrity, 20(sup1), S18-S32.
  • Nordberg, D. (2009). Politics in corporate governance: how power shapes the board's agenda. Centre for International Business and Sustainability (CIBS) Working Paper, (3). DOI: 10.2139/ssrn.
  • Pope, K. S. (2015). Steps to strengthen ethics in organizations: Research findings, ethics placebos, and what works. Journal of Trauma & Dissociation, 16(2). DOI: 10.1080/.2015.995021
  • Roszkowska, P., & Melé, D. (2020). Organizational Factors in the Individual Ethical Behaviour. The Notion of the "Organizational Moral Structure". Humanistic Management Journal, 1-23. DOI
  • Tiller, S. R. (2011). Effective business governance. Leadership and Management in Engineering, 11(3).

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