Question:
Discuss about the Research Proposal on Impact of Corporate Governance on Organizational Performance.
Corporate governance can be defined as the ways in which a corporation or a business is governed i.e. it facilitates in managing and directing the companies. Moreover it can also be referred to as the process of carrying out the business as per the desire of the stakeholders and the corporate governance is mainly carried out by the board of directors and the concerned committees in order to achieve an effective balance between the individual goals and the societal goals together with balancing the social and the economic goals (Hirschey et al., 2007). Thus it can be said that with ineffective corporate governance, the organizations fail in achieving their goals, aims and objectives which ultimately leads to the organizational failure.
Thus taking into consideration the above aspects, it has been observed that corporate governance of the companies have gained much importance over the past decades and this can also be related to events of high profile corporate collapses in case of HIH insurance and One.Tel in Australia. So as a result of these incidents, the Australian Stock Exchange (ASX) released a document named under “Principles of Good Corporate Governance and Best practice Recommendations” and it emphasizes upon providing strict guidelines in the context of the implementation of the practices related corporate governance for the maximization of the value with the help of innovation, entrepreneurship, exploration and development. So it can be said that corporate governance drives the organizations to be fair and ethical in their practices and approach taking into consideration its involvement with the extensive group of stakeholders that include the suppliers, the government, the shareholders and the customers and the employees (Mallin, 2008). Thus it facilitates the business organization to develop an effective structure and adopt efficient processes for facilitating and monitoring effective management that include the mechanisms towards ensuring legal compliance and avoiding improper and unlawful behavior.
Thus the researcher in the present study would strive towards gaining an understanding of the concept of corporate governance and analyzing whether corporate governance is related to the organizational performance in the context of Woolworths Ltd which is a major Australian company operating in the retail industry across New Zealand and Australia. Moreover the company is also the largest takeaway liquor retailer in Australia (Woolworths, 2012). The company has its headquarter at Bella Vista in New South Wales in Australia and it is the second largest retailer in Australia and New Zealand in terms of revenue.
Research background
Corporate governance has been put forward as a relationship that exists between the management of the company, the board of directors, the shareholders and the other stakeholders. Corporate governance in the past few decades has emerged as a major issue in the business organizations and thus taking into consideration these issues, there have been various legislative changes and the provisions that have been implemented on business organizations across the globe so that the governance arrangements can be improved and enhanced (Hill, 2008). This has made it compulsory on the part of the business organizations to abide by these policies and provisions so that the maximization of the value on the part of the shareholders can be ensured by making an effective use of the resources that are available to the business, enhancing the ability to have an easy access to the capital and thus enhancing the confidence of the investors (Farrer and Ramsay, 2008). So it is observed that corporate governance not only takes into consideration only the internal organizational conditions, it also emphasizes upon the external organizational conditions and thus providing a way regarding how the business organizations need to be managed in an efficient manner to respond efficiently to the external conditions.
So the researcher would emphasize upon how corporate governance leads the organization towards efficiently managing the external as well the internal conditions to lead the organization towards success in the context of Woolworths Ltd.
Research Rationale
The impact of corporate governance on the maximization of the value on the part of the shareholders has emerged as a topic of interest and from the early researches this has been established. But despite of the acceptance of the role of corporate governance, the studies failed in providing a detailed conclusion in the context of the extent to which the individual monitoring mechanisms strive towards enhancing the value of the shareholders and the performance of the firm.
So this motivated the researcher to undertake the study and analyze the ways in which corporate governance facilitates the management and the business to enhance the value of shareholders and the performance on the firm. However, the study would be limited to a particular organization i.e. Woolworths Ltd operating in the retail industry in Australia.
Problem Statement
With the passage of time, developments in the business environment have taken place and changes on the part of the stakeholders have taken place in the ways in which they tend to look upon the business organization. So at present the stakeholders demands the business organizations to be fair and ethical in their approach in both their and external operations and it has also been proved that it facilitates the business organizations to have a good brand image in the market and enhanced business profitability with customer loyalty (Hirschey et al., 2007). So in order to achieve this, there are certain factors that need to be taken into consideration and among the concerned factors corporate governance is the most essential factors. Thus the problem that has been unidentified by the researcher for the particular study is the role of corporate governance in enhancing the firm performance and maximizing the shareholders’ value.
Research Aim and Objectives
The researcher in the present study would emphasize upon analyzing the role of corporate governance and thus the entire study would be observed to be revolving around the following objectives:
Literature Review
As per the studies conducted Newton, (2015), corporate governance can be defined as the ways in which the business organization is managed together with reflecting the corporate and the other structures of the organization, organizational culture and its strategies and policies and the ways in which the stakeholders are managed. Thus from the above it can be identified that corporate governance can be looked upon as a culture of the business that strives to foster economic growth through enhancing the confidence on the part of the stakeholders. Moreover on the other hand, Treichler, (2007) put forward the fact that corporate governance can also be looked upon as a totality of the organizational and the institutional mechanisms that also takes into consideration the intervention, the decision making and the control rights that facilitates the business organizations in efficiently managing the conflicts of interest that tend to exit among the stakeholders.
Thus from the above it can be inferred that the management of the organizations are involved in taking various decisions but the quality of decisions that are taken by the directors of the company does not depend only upon the attitude of the directors towards adopting the right course of actions but it also depends upon the extent to which these resolutions are similar or in harmony to the long term goals on the part of the stakeholders.
Effectiveness of the Board
Taking into consideration the board effectiveness in business organizations, it has been observed that it involves various factors like the structure of the board, board composition, board size, independence of directors and the performance. So in this context, studies of (Baxt et al., 2002) have revealed the fact that it is expected that a board with limited size should perform more efficiently in comparison to the board which is bigger in size since small size leads to enhanced communication and thus effective decision making leading to enhanced organizational performance.
CEO Duality
It has been put forward by the studies conducted by Baysinger & Butler, (2008) that independent leadership is more effective in comparison to the organizations that practice CEO duality.
Audit Quality
Higher quality level of audit tends to for a major part of the governance mechanism and thus the audit committee and the auditors tend to play a major role in looking after the financial management of the company that leads to enhanced performance on the part of the business organization (Baysinger & Hoskisson, 2009). However it has also be observed that even though there exist an effective link between the governance, the audit quality and financial performance, audit quality has relationship with dividend yield and not with the operating performance of the organization.
Corporate social responsibility in the present times have emerged as an increasing need for the business organizations since they have to involve in high level interaction with the different stakeholders and also with the society at a large (Hunnicutt, 2009). So if they tend to behave ethically and fairly then it would facilitate the business organization in sending or communicating the right message to the different stakeholders and thus it would facilitate in developing a positive perception of the stakeholders towards the company which would ultimately lead to enhanced organizational performance and brand image.
The Australian Securities Exchange (ASX) Corporate Governance Council’s Principles
The ASX, in the context of the corporate governance of the business organizations operating in Australia tends to play a major role and there have been 10 core principles that have been laid down by ASX for effective corporate governance. These principles tend to act as guidelines for the business organizations and are also not intended to be authoritarian and this is because a business organization in Australia enjoys the flexibility of not adopting the principles if it is felt by the company that the principle is not appropriate in a particular circumstance (Bebchuk et al., 2008). However it is mandatory on the part of the business organizations to disclose in their annual statement the extent to which they have been successful in abiding by the best and the recommendations that have been put forward by ASX Corporate Governance Council and if they have adopted any alternative approaches, then it is mandatory they are justified. Moreover the roles of the management and the board are also stated by the ASX Corporate Governance principles by maintaining an effective balance of the experience, skills and the independence that is appropriate to the extent and the nature of the operations of the business organization (Atmaja, 2009). The 10 core principles can be listed as follows:
Conceptual Framework
[Source: Self]
Thus in the present study the researcher would analyze the concept of corporate governance in the context of aspects like the size of the board, CEO duality, independence of directors, audit quality and others and how these factors makes a significant impact on the organizational performance . So corporate governance factors would be considered as independent variable and the performance would be considered as a dependent variable.Research MethodologyResearch methodology helps the researcher to evaluate and analyze the collected data and information in most effective manner (Hair and Money, 2011). Thereby his aid in gaining and establishing a standardized procedure in order to evaluate and conduct the research so that every information and data that has been collected by the researcher is focused upon when needed.
Research philosophy helps the researcher in order to develop skills and knowledge most effective and successful manner while conducting the research. There are three types of research philosophies are available and these are the realism philosophy, positivism philosophies and interpretivism philosophies.
The interpretivism philosophy provides the thoughts that the social world of the management and organization is multifaceted since they are formulated in rules and regulations. The positivism philosophies offer effective opportunities to the researcher to analyze the outcomes with using an effective statistic tools and techniques (VanderStoep and Johnson, 2009). This philosophy also offers the researcher to collect most relevant information and data related with the present research topic that has been accepted for the study. In addition to this realism philosophy is based on the person attitude and values are mutually dependent to each other.
The primary purpose of the present research is to evaluate and analyze the role of corporate governance in organizational performance and maximization of value on the part of the shareholders in the context of the Woolworths Ltd. Therefore taking into consideration the facts and observation the researcher would use positivism philosophy since the quantitative data would be involved in the study and the researcher would also adopt the realism philosophy since qualitative data would be involved.
Research Approach
Research approach gives an explanation to the progress pattern of the research that has been adopted by the researcher. The researcher mainly has two approaches to follow namely the deductive approach and the inductive approach.
In the process of deductive approach the researcher formulates and evaluates the data and information on the basis of the available theories (Saunders et al., 2009). On the basis of various data collected by the researcher, the researcher rejects or confirms the data and information and resolves the issue. The deductive approach follows the positivism philosophy assisting the researcher to reach at specific situations.
In the deductive approach the researcher make use of observed data and information, here there is no predetermined theory to help the researcher to collect the relevant data or information to test the collected data and information (Morgan, 2007). Here in the deductive approach the researcher make use of real life observation to produce subjective reasoning to make the hypothesis.
The researcher would adopt the inductive approach since the study would be based mainly upon the research objectives that have been set and so in this particular study the researcher would emphasize upon moving from the particular experiences to more general form of the propositions so analyze the role of corporate governance.
Data Collection
Data and information plays an important roles and using an effective data and information researcher gain an accurate outcomes (Cooper and Schindler, 2010). Thus to conduct research most effective and appropriate manner researcher would collect both primary and secondary data. In addition researcher would implement a mix approach that would include both the quantitative and qualitative data collection methods.
Primary and Secondary data
Primary data refers to the fresh data that is collected by the researcher. The primary data are the most relevant and it involves a lot of time to be collected and the procedure is lengthy on the other hand the secondary data are the data that has already been collected for other research and thus guiding the research work.
The primary data would be collected directly with help of the survey questionnaire method and face to face interview method and the secondary data would be collected from various online and offline sources, like online journals, websites and from library sources.
Qualitative and Quantitative data
The data which would be collected for the research are again classified into quantitative and qualitative data. The researcher would analyze the responses of the target audience depending upon the pattern of the collected data. Qualitative data refers to the detail form of response that are narrative whereas Quantitative data refers to the numerical data that are recorded statically by using statistical tools (Crowther and Lancaster, 2012). Example of a Qualitative Data-respondents choice likes and dislikes, etc, Example of Quantitative Data-age, salary, etc.
The Qualitative Data in the particular study would be collected by conducting interview method where a particular set of questions would be asked to the managers. The Quantitative would be collected by conducting a survey with help of a questionnaire targeting the employees from the organization.
Sampling Choice and Sample Size
The researchers would use the probabilistic sampling technique to select the employees for the survey since it would facilitate them with equal chance of participation and the researcher would use the non-probabilistic sampling technique to select the managers since their participation would depend upon their busy schedule (Saunders et al., 2009).
The researcher would target 4 managers for interview and 40 employees for the survey.
Data Analysis
The qualitative data would be analyzed with help of conceptualization method by the researcher which would provide him the opportunity to compare the emerging themes with the previous theories. The quantitative data i.e. the response of the employees would be analyzed with statistical tools and techniques with the help of use of MS excel, bar char and pie chart.
Research limitations
The researcher would face both the time and financial constraint for the study. This is because the study is cross-sectional in nature, so time would be major constraint and it would involve lot of traveling expenses, expenses to purchase the materials and the other requirements for the study (Saunders et al., 2009).
Research Ethics
The researcher would share the details of the research among the respondents to maintain the ethics of the research. The details would be shared among the participants and respondents to explain them the purpose of the research. The data collected by the researcher would be mainly used for the academic purpose (Cameron, 2009). Confidentiality of the data collected from managers and employees would be maintained by the researcher.
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Possible Outcome
It is expected that corporate governance tend to lead the organization towards enhanced performance and there would be positive relationship between the firm performance and corporate governance.
References
Ali, S. (2006). Corporate Governance and Stock Liquidity in Australia: A Pitch. SSRN Electronic Journal.
Atmaja, L. (2009). Governance mechanisms, simultaneity and firm value in Australia. International Journal of Corporate Governance, 1(3), p.241.
Baxt, R, Ramsay, I & Stapledon, G (2002), ‘Corporate Governance in Australia: The Evolving Legal Framework and Empirical Evidence’, in Lc Keong (ed.), Corporate Governance: An Asia-Pacific Critique, Sweet & Maxwell Asia, Hongkong, pp. 175- 86.
Baysinger, B & Butler, H (2008), ‘Corporate Governance and Board of Directors: Performance Effects of Changes in Board Composition’, Journal of Law Economics and Orgainization, vol. 1, no. 1, pp. 101-24.
Baysinger, B & Hoskisson, ER (2009), ‘The Composition of Board of Directors and Strategic Control: Effects on Corporate Strategy’, Academy of Management Review, vol. 15, no. 1, pp. 72-87.
Bebchuk, L, Cohen, A & Ferrell, A (2008), ‘What Matters in Corporate Governance’, Review of Financial Studies, vol. 22, no. 2, pp. 3-11.
Cameron, R. (2009). ‘A sequential mixed model research design: design, analytical and display issues’, International Journal of Multiple Research Approaches, 3(2), 140-152
Cooper, D. and Schindler, P. S. (2010) Business Research Methods, 11th ed. London: McGra-Hill.
Crowther, D. and Lancaster, G. (2012). Research Methods, 2nd ed. London: Routledge.
Farrer, J. and Ramsay, I. (2008). Director Share Ownership and Corporate Performance – Evidence from Australia. Corporate Governance, 6(4), pp.233-248.
Hair, J. F. and Money, A. H. (2011). Essentials of Business Research Methods, 2nd ed. New York: M. E. Sharpe. Inc.
Hill, J. (2008). Corporate Criminal Liability in Australia: An Evolving Corporate Governance Technique?.SSRN Electronic Journal.
Hirschey, M., John, K. and Makhija, A. (2007). Corporate governance. Amsterdam: Elsevier JAI.
Hunnicutt, S. (2009). Corporate social responsibility. Detroit, MI: Greenhaven Press.
Mallin, C. (2008). Corporate governance. Oxford: Oxford University Press.
Monks, R. and Minow, N. (2007). Corporate governance. Malden, Mass.: Blackwell Pub.
Morgan, D. L. (2007). “Paradigms lost and pragmatism regained: methodological implications of combining qualitative and quantitative methods”, Journal of Mixed Methods Research, 1(1), pp. 48-76.
Newton, A. (2015). Executive compensation, organizational performance, and governance quality in the absence of owners. Journal of Corporate Finance, 30, pp.195-222.
Saunders, M. N., Lewis, P. and Thornhill, A. (2009) Research methods for business students, Page 52, 5th ed. Harlow: Prentice Hall
Shekhar, C. and Stapledon, G. (2007). Governance Structures of Initial Public Offerings in Australia.Corporate Governance: An International Review, 15(6), pp.1177-1189.
Svensson, G. and Wood, G. (2007). Strategic approaches of corporate codes of ethics in Australia: a framework for classification and empirical illustration. Corporate Governance: The international journal of business in society, 7(1), pp.93-101.
Treichler, C. (2007). Diversity of Board Members and Organizational Performance: An integrative perspective.Corporate Governance: An International Review, 3(4), pp.189-200.
VanderStoep, S. W. and Johnson, D. D. (2009). Research Methods for Everyday Life: Blending Qualitative and Approaches. 4th ed. San Francisco: Jossey-Bass.
Woolworths. (2012). Woolworths Supermarket – Buy Groceries Online: Business and Corporate Governance. [online] Available at: https://www.woolworths.com.au [Accessed 26 May 2016].
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