Discuss about the Models and Practices of Corporate Governance.
Harvey Norman is an Australian furniture, home accessories and bedding company. It is a part of the ASX-listed Harvey Norman Holdings Limited and currently boasts of spreading across Australia, New Zealand, Europe and South-East Asia with 280 stores. The company presents with a spirit of enthusiasm and entrepreneurship, deeply embedded in their organizational culture (Harveynorman.com.au, 2017).
This study would cover the factor of corporate governance in organizations and how it can influence the functioning of the organization. In this case, Harvey Norman has been chosen, and the governance assessment would be applied to it for the enhancement of their business practice.
Corporate governance is a broad successive term which, notwithstanding different things, veils the fundamentals, links, methodologies, arrangements and practices whereby mastery inside associations are bore and kept up. The governance virtues of an association are shaped by a variety of factors, both “inside” (e.g. foundation, various levelled game plans) and “outside” (e.g. laws, bearings, bunch wants). A board of boss wait for a basic element in swaying an association’s governance circumstance (Companydirectors.com.au, 2017). Harvey Norman strongly believes that the base of its sustainability is directly proportional to its taking responsibility for the environment and society. Their management team takes up the responsibility of their day-to-day business activities, and have separate environmental coordinators who take care of training, water and energy conservation, and waste management.
In businesses like Harvey Norman, governance is majorly implemented to make sure the development and innovative advancements of the organization proceeds in a proper way for making the results sustaining and breakthrough (Governanceinstitute.com.au, 2017). Sustaining innovation does not create any new market or any kind of value network. It only develops the current ones by means of better value. In contrast, disruptive innovation introduces new market and value network that are not better, but are less expensive, more convenient and displaces established market leading firms (Christensen & Raynor, 2013). However, Harvey Norman lacks innovation in any form. They are far from implementation of retail innovation inside the management ranks. The failure of evolving the customer offerings and the business model challenged the organization, from which even their governance could not help. Harvey Norman demonstrated the ability to bring innovative services, which brought long-term success for the company. There is a need for risk taking, non-standard solutions from Harvey Norman’s side to make sure innovation and creativity is promoted. It is the responsibility of the managers to display appropriate entrepreneurship to create change and opportunity in the organization and generate profit for them. In Harvey Norman, the entrepreneurship factor cannot be easily defined. The entrepreneurs of the organization have the opportunity to use innovation for exploiting or creating change and opportunities for making profits. Harvey Norman believes in the physical retail experience and is extremely prejudiced by the tax exclusion on overseas online purchases. They lack the knowledge of the benefits of online-business and fails in doing things as they are supposed to do.
Harvey Norman, as a firm, strictly adheres to the traditional closed system of innovation, and not the open innovation approach in which firms get the opportunity to commercialize internal and external ideas by deploying internal and external pathways to the market. Harvey Norman tries to make their employees feel they are important and part of something bigger, as a part of knowledge management. People need to feel that their knowledge would be useful at the firm they are working. In this context, Harvey Norman attempts operating as a learning organization and keep improving with time. They are aiming to stress more on tacit knowledge, as the idea generated from such people would be unique and create a competitive edge for the company (Hislop, 2013).
A capable governance structure would have proper consideration towards the:
So likewise, a capable board appraisal or board review would regularly attempt to incorporate expression on a union’s governance from each of these alternative standpoints (Asx.com.au, 2017). Back in 2003, Harvey Norman came up on reports as having the lowest score in corporate governance. It is important for them to understand the elements of the same and incorporate the best sustaining practices in their operations.
Proper corporate governance in Harvey Norman can modify the interests of the board of boss, organization and accomplices, while moreover giving the structure that sets up the objectives of the association and the systems for fulfilling these goals and surveying execution. Distinctive styles of corporate governance exist to suit the necessities of associations like Harvey Norman (Tricker & Tricker, 2015).
The unitary board includes managers, for instance, the head of the association and non-authorities who have no prior ties to the association before their game plan. Correspondence streams well among authority individuals since all are aware of corporate information and data (Van den Berghe, 2012).
Exactly when an association has an organization board and another supervisory board, it works under dual boards. Under this structure, the shareholders pick the supervisory board which directs the organization board (Ahmed & Henry, 2012).
A partnership style of corporate governance is depicted by a significantly included board and top organization. A culture of straightforwardness and support is fundamental for the two social affairs to collaborate setting up the association’s courses of action, methods, objectives and missions (Hilb, 2012).
Diverse corporate governance models have turned out to be progressively investigated and examined as globalization grabs hold in world markets. Some of them are:
The Anglo-US model is depicted by share duty regarding, and logically institutional, budgetary masters not related with the organization; a particularly made honest to goodness structure portraying the rights and obligations of three key players, to be particular organization, boss and shareholders; and an also uncomplicated framework for association among shareholder and association and what’s more among shareholders in the midst of or outside the AGM (Ungureanu, 2012).
In the Japanese model, governance plans happen as expected in light of two common legal associations: one between shareholders, customers, suppliers, credit managers and delegate unions; the other between chiefs, bosses and shareholders (Chizema& Shinozawa, 2012).
In the continental structure, the corporate substance is seen as an arranging vehicle between national interest social affairs. Banks frequently accept a large part monetarily and in essential authority for firms. These associations usually have an official board and a supervisory social affair (Piesse, Strange & Toonsi, 2012).
The cause of Harvey Norman’s downfall in the context of corporate governance was due to the environmental proposal they put forward, which was both ill-conceived and ill-timed. Institutions seeing themselves as owners and not just investors have been the missing link in governance acts.
The Principles and Recommendations apply to all Australian Stock Exchange (ASX) recorded components, including Harvey Norman, paying little notice to the final report they take, paying little heed to whether they are developed in Australia or elsewhere, and whether they are inside or remotely directed (Asx.com.au, 2017). The standards for good corporate governance in Australian companies, and in this context for Harvey Norman are:
The consequences that Harvey Norman can face because of corporate governance failure are:
Corporate governance in Harvey Norman is efficient and formalized directly of ensuring that the board of administrators doesn’t settle on essential authority powers occasioned by organization and ownership division to look for after individual interests to the disadvantage of several accomplices (Salvioni & Astori, 2015).
The overseas market and organizational situation for Harvey Norman is different than their home country Australia. The Australian stores are under a franchised system, whereas overseas stores are trading under the brand name. In New Zealand they dominate with their strong brand position and makes sure that the market shares are regularly captured with the help of appropriate governance. In Ireland, the company is a market leader in major categories. Their strong governance approaches and long-term innovative operations have helped grow their year-on-year sales and product margins. With the help of strong governance they are aiming at improving viability and long-term outlook for their operations in the region. With such brilliant overseas feat, it is expected for the organization to be holding a superior position in their home country. However, that is not the case, as the retailer is fed up the Australian attitudes. There are complaints regarding low cooperation level of the government. They are operating above parity, in turn increasing costs. They have attempted recently to be online, but lack the local support needed to sustain in the market.
Conclusion
Individual and business ethics underlie each one of the bearings and codification in corporate governance. Law and controls alone can never guarantee sensible practice. Individuals in spots of effect and authority need to need to apply sensible practice and hold quickly to the rules. Laws, bearings, accounting standards and codes are kept on the doubt that they will be taken after. Statutory and authoritative compliances are starting stages for a suitable governance system. The business focus is a certain consistence officer, this is as per the reasoning in a couple of districts for associations to assent or clear up rather than concur, or something terrible may happen, concerning officials’ governance of an association. It is the responsibility of Harvey Norman to comply with the standards set by the Australian Government with regards to corporate governance.
References
Ahmed, K., & Henry, D. (2012). Accounting conservatism and voluntary corporate governance mechanisms by Australian firms. Accounting & Finance, 52(3), 631-662.
Asx.com.au. (2017). Corporate Governance Principles and Recommendations. Retrieved 24 April 2017, from https://www.asx.com.au/documents/asx-compliance/cgc-principles-and-recommendations-3rd-edn.pdf
Chizema, A., & Shinozawa, Y. (2012). The ‘company with committees’: Change or continuity in Japanese corporate governance?. Journal of Management Studies, 49(1), 77-101.
Christensen, C., & Raynor, M. (2013). The innovator’s solution: Creating and sustaining successful growth. Harvard Business Review Press.
Claessens, S., & Yurtoglu, B. B. (2013). Corporate governance in emerging markets: A survey. Emerging markets review, 15, 1-33.
Companydirectors.com.au. (2017). What is corporate governance? – Australian Institute of Company Directors. Retrieved 24 April 2017, from https://www.companydirectors.com.au/director-resource-centre/governance-and-director-issues/corporate-governance
Governanceinstitute.com.au. (2017). Governanceinstitute.com.au. Retrieved 24 April 2017, from https://www.governanceinstitute.com.au/
Harveynorman.com.au. (2017). Harvey Norman | Shop Online for Computers, Electrical, Furniture, Bedding, Bathrooms & Flooring | Harvey Norman Australia. Retrieved 24 April 2017, from https://www.harveynorman.com.au/
Hilb, M. (2012). New corporate governance: Successful board management tools. Springer Science & Business Media.
Hislop, D. (2013). Knowledge management in organizations: A critical introduction. Oxford University Press.
Kathy Rao, K., Tilt, C. A., & Lester, L. H. (2012). Corporate governance and environmental reporting: an Australian study. Corporate Governance: The international journal of business in society, 12(2), 143-163.
Khan, A., Muttakin, M. B., & Siddiqui, J. (2013). Corporate governance and corporate social responsibility disclosures: Evidence from an emerging economy. Journal of business ethics, 114(2), 207-223.
Okhmatovskiy, I., & David, R. J. (2012). Setting your own standards: Internal corporate governance codes as a response to institutional pressure. Organization Science, 23(1), 155-176.
Piesse, J., Strange, R., & Toonsi, F. (2012). Is there a distinctive MENA model of corporate governance?. Journal of Management & Governance, 16(4), 645-681.
Salvioni, D. M., & Astori, R. (2015). Sustainable development and global responsibility in corporate governance.
Tricker, R. B., & Tricker, R. I. (2015). Corporate governance: Principles, policies, and practices. Oxford University Press, USA.
Ungureanu, M. (2012). Models and practices of corporate governance worldwide. CES Working Papers, (3a), 625-635.
Van den Berghe, L. (2012). International standardisation of good corporate governance: best practices for the board of directors. Springer Science & Business Media.
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