Stakeholders’ Interest, Threats, And Relationship Between Boards Of Directors And Shareholders

1. a) Conflict of interests’ arising between various stakeholders in a company

1. a) Conflict of interests’ arising between various stakeholders in a company?

b) Discussing how a threat that is created by controlling shareholders in the companies hinder good practices of corporate governance?

2) Discussing the relationship between the boards of directors of the company along with the shareholders?

According to Brueckner and Mamun (2010) ethics is essential for the organization in order to maintain a good corporate image within the organization as well as outside the organization among all the stakeholders. So, the organization while operating, need to maintain the ethics to the maximum extent for maintain a long term relationship with all the stakeholders. This assignment deals with the interest levels of various stakeholders along with the threats that are created in order to maintain good practices within the organization. In addition to this, the relationship between the boards of directors along with the shareholders is also discussed vividly.

Liket and Simaens (2013) commented on the fact that each of the stakeholders has their own interest that overlaps with that of the other stakeholders. It is the main concern of the stakeholders to see the interest of the company that gives a balance between their interest and interest of the organization. The shareholders comprises of minority, majority as well as institutional shareholders. According to Shaukat et al. (2015) these shareholders take up the decisions of the companies and appoint and remove directors.

Directors- Directors are of 3 types-executive, independent and non-executive representing the whole management of the organization. Manner (2010) had an opinion that the directors according to their category have are responsible for successful operations within the organization. These directors are responsible enough to take decisions regarding the welfare of the company. According to Zimmerli et al. (2007) they are sole responsible for making up the policies based on which the management of the company will be operating. So, a strong policy by undertaking the ethical moves will surely bring success and satisfaction to all the shareholders of the company.

Employees- Heenetigala et al. (2014) had a view that employees are other stakeholders that are in need of a job for getting salary. The directors don’t owe any kind of duties to the employees. A company can even slash their jobs that may occur due to firm cash flows as well as huge loss. According to Li and Zhang (2010) the employees are the integral part of the organization, so more the company will be focused on their ethical approach, the more they will retain their employees. Greater employee retention will obviously bring success to the organization.

Creditors as well as debenture holders- The director’s don’t hold any kind of ethical relationship with the of the company hold some ethics and norms to the company’s creditors and if a company fails the creditors cannot blame the directors for it. To the contrary, Painter-Morland (2010) had an opinion that the directors hold some interest and norms to the company’s creditors at the time when the company is at the brim of insolvency.

Directors

Customers, suppliers and consumers- According to Barnea and Rubin (2010) the customers are also the company’s stakeholders since they expect services as well as goods at a fair and a reasonable price. There re companies that are so unethical that they only aim for profit and for that they adopt unethical and illegal business practices. To give these companies a good response because of their unethical workings, from the opinion of Brink (2009) the customers in return need to boycott the goods and services of these companies. Moreover, the suppliers also live up to the expectation that the company will be paying them in time and fairly for the goods that are been supplied. So, Berenbeim (1992) had a view that in order to operate ethically and systematically, the company needs to be ethical in their approach and towards their customers as well as suppliers. The better the customers and suppliers will be satisfies, the better the company will gain respect for its ethical approach.

Society as well as general public- Vranceanu (2013) commented that the public expect to receive the services at time without any delay. On the other hand, the companies also need to be responsible business enough for providing the services to the public and accomplish their trading in a socially conscientious way. In addition to this, Manner (2010) had a view that the companies that are involved in manufacturing business are expected to be environmental friendly. For that they need to treat the waste materials before disposal for minimizing the pollution. Moreover these companies also need to minimize the sound pollution and other environmental pollutions. According to Zimmerli et al. (2007) the companies that are involved in extracting natural resources also need to integrate the sustainable principles that will help them in conducting fair business practices. In contrast to this, Barnea and Rubin (2010) also mentioned that there are companies who due to maximize the profits disregard the interest of the public and environment. As a result these companies continue working unethically by adding more pollution to the society and environment.

Government- Liket and Simaens (2013) had a view that there are government are holding shares of the government aided companies. The expectations of the Government are just the same as the normal shareholders that is getting or receiving utmost returns from the investments it has done. From the view point of Barnea and Rubin (2010) this arise conflicts in the interest level of the government. This is because; the government is also bounded by laws, rules, norms and regulations that help in keeping a balance between the interests and the ethics. It is essential for the government to receive interest to the maximum extent but it also have to keep in mind the norms, rules, regulations of both the parties that is government as well as company is well maintained. Heenetigala et al. (2014) commented that by doing this, both the company as well as the Government stays on the safe side.

Fund managers as well as instructional investors- According to Brink (2009) the fund managers along with the instructional investors influence the company’s management to a great level. The fund managers are answerable to the depositors as well as clients that are expecting attractive as well as a handsome return from the investments that are done. Painter-Morland (2010) commented on the fact that by doing this, sometimes the interests of the minority shareholders are disregarded. It is always to be remembered that the all the stakeholders want to fulfill their interests and for that the company need to work ethically for satisfying all the stakeholders as well as maintain the rules and norms for it.

Employees

Manner (2010) commented on the very fact that the shareholders make the rules, norms, regulations and policies that are totally concerned with the practices that the corporate governance undertakes. When the shareholder invests the money in an organization, they expect a good return from the organization. So, according to Heenetigala et al. (2014) for hindering good practices within the organizations the shareholders need to create threats. It is obvious the employees who need job in exchange of salary will be terrifies and will try to be more productive in their approach that will help in higher production as well as higher revenues from the company. From the view point of Liket and Simaens (2013) the legal as well as the governance principles are so made that helps the organization as well as the stakeholders to follow the way of ethics and operate ethically.

According to the Companies Act 1965, all the activities of the business and the happenings within the company are well managed by the directors. The board of directors’ supervises and well manages the company affairs and is associated with the company. Barnea and Rubin (2010) commented on the facts that since the directors are the main operating body, the shareholders cannot interfere with the directors decision regarding the powers that are exercised. In Malaysia, the Bursa Malaysia Listing Requirements and Companies Act possess the residual powers of the general meetings. Vranceanu (2013) commented on the fact that stakeholders and directors may have stakes from the same company. These both parties are work together for a common goal. The stakeholders as well as the directors are having conflicting interests that are accountable to the possessor of the company.

Conclusion

To conclude this assignment, it can e said that the shareholders are the inseparable part of the organization. They are the sole policy makers within the organization and they make the policies and rules keeping in mind the ethical approaches. This is because, the organization if is ethical in their approach, then the company will be pursuing high up in the eyes of the rest of the stakeholders. In addition this, the threats that are been created by shareholders for maintaining a good practice within the organization is also discussed. The relationship between the shareholders with that of the board of directors is also explained.

References

Barnea, A. and Rubin, A. (2010). Corporate Social Responsibility as a Conflict Between Shareholders. Journal of Business Ethics, 97(1), pp.71-86.

Berenbeim, R. (1992). Corporate ethics practices. New York, NY: Conference Board.

Brink, A. (2009). Enlightened Corporate Governance: Specific Investments by Employees as Legitimation for Residual Claims. Journal of Business Ethics, 93(4), pp.641-651.

Brueckner, M. and Mamun, M. (2010). Living downwind from corporate social responsibility: a community perspective on corporate practice. Business Ethics: A European Review, 19(4), pp.326-348.

Heenetigala, K., Armstrong, A. and Clarke, A. (2014). Corporate Regulation and Corporate Governance of Small Businesses in Australia. Journal of Business Systems, Governance & Ethics, 6(3).

Li, W. and Zhang, R. (2010). Corporate Social Responsibility, Ownership Structure, and Political Interference: Evidence from China. Journal of Business Ethics, 96(4), pp.631-645.

Liket, K. and Simaens, A. (2013). Battling the Devolution in the Research on Corporate Philanthropy. Journal of Business Ethics, 126(2), pp.285-308.

Manner, M. (2010). The Impact of CEO Characteristics on Corporate Social Performance. Journal of Business Ethics, 93(S1), pp.53-72.

Painter-Morland, M. (2010). Questioning corporate codes of ethics. Business Ethics: A European Review, 19(3), pp.265-279.

Shaukat, A., Qiu, Y. and Trojanowski, G. (2015). Board Attributes, Corporate Social Responsibility Strategy, and Corporate Environmental and Social Performance. Journal of Business Ethics.

Vranceanu, R. (2013). Corporate profit, entrepreneurship theory and business ethics. Business Ethics: A European Review, 23(1), pp.50-68.

Zimmerli, W., Richter, K. and Holzinger, M. (2007). Corporate ethics and corporate governance. Berlin: Springer.