Why Corporate Governance Is an Important Ethical Issue

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Why Corporate Governance is an Important Ethical Issue

As consumer movements grow stronger and stakeholders become more knowledgeable and aware of company operations, it has become necessary for corporations to come to grips with ethical issues in order to continue surviving in business. Consumers and stakeholders are becoming increasingly aware of the adverse effects of unethical business practices like low quality products and services, financial embezzlement, disregard for environmental issues and unhealthy working conditions among others. Most companies have realized the importance of upholding virtues like transparency and integrity. It has therefore become necessary to formulate and implement appropriate corporate governance mechanisms.

Corporate governance refers to a system by which a company is properly managed by adopting internationally recognized ‘best practices’ of management. It involves the company’s commitment values and ethics in order to achieve its objectives, manage risks, and improve performance. Corporate governance ensures that the company’s shareholders, customers, the staff, and investors are all treated fairly in accordance to a code of business ethics. Corporate governance is indeed critical in enhancing and retaining clients’ and investors’ trust (Parker 191).

In sound corporate governance, financial integrity plays an important role in ensuring that directors and everyone concerned are open and sincere especially when conflicts arise in financial decision making processes. A good example is during deliberations about purchasing or procurement procedures where greater transparency is indeed required. However, in an effort to arrive at the best financial or business results, a conflict might arise between moral and legal issues. In such instances the dilemma can only be solved by the corporate governance...
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