Running head: CORPORATE GOVERNANCE BENCHMARKING
Corporate Governance Benchmarking
University of Phoenix
November 30, 2009
Corporate Governance Benchmarking
McBride Financial Services Inc. is a low cost mortgage provider located in Boise, Idaho, Montana, Wyoming, as well as North and South Dakota. Recently, Beltway Investments became the majority investor in McBride Financial Services, Inc. As a result, McBride’s CEO needs the board of directors’ collaboration while setting up internal governance controls and ensuring proper auditing. To secure that corporate governance benefits the company and investors, McBride’s CEO needs to consider benchmarking. Thus, the authors of this paper examine the benchmarking of Adelphia Communications, Tyco, Calpine Corporation, and Tyson Foods to help develop best practices for McBride Financial Services, Inc. Accordingly, Chew and Gillan (2005) state, “The role of top management is no longer just control and coordination; it is anticipating, leading, and managing change and articulating the rationale for such change to employees” (p. 2). Hence, the lack of corporate governance could not be demonstrated better than the rise and fall of Adelphia Communications. Adelphia Communications was at one time the fifth largest cable provider in the United States. The company was controlled by John Rigas, the founder of Adelphia, and his family; they controlled 60 percent of the total voting shares. The family considered Adelphia funds their own personal funds and spent them lavishly on everything from airplanes to professional sports teams. When all was finally revealed, the Rigas family received $3.4 billion in loans from Adelphia. The company eventually filed for bankruptcy and was split up in a buyout by Time Warner Cable and Comcast (Comcast, 2006). McBride Financial Services, Inc. (MFSI) is a small company controlled by McBride, the CEO. He is looking to move to the next level, like Adelphia. MFSI has recently formed a partnership with Beltway Investments to allow growth into a regional financial services provider and form a board of directors.It is not a partnership. It is a corporation and owned by Hugh and Beltway. They are not partners which is a different legal form of business. The company needs to embrace the board of directors as an independent oversight committee and not as rubber stamp committee, yet this is the initial direction the CEO wants the board to take (University of Phoenix, 2009). Adelphia Communications failed because the board was part of the corruption and independent from the daily operations of the company. The CEO needs to also allow an external accounting firm to conduct regular audits, regardless of the results, of the company to ensure the corruption of Adelphia is not duplicated because “The way boards are structured, meeting every other month, they have to rely on outside advisers” (Patsuris, 2002). Another situation to consider is the decline of the stock prices for Tyco, turning out to be quite detrimental because of the same actions of Kozlowski, the former CEO; he failed to lead the company affectively. Kozlowski was found guilty of using company funds for his personal expenses (Cummins, 2006). Even though he was found guilty, the company’s image is still flawed and questioned, the same as the value of company stock prices. Nevertheless, Eric Pillmore is in the process of reclaiming the company’s image by reconstructing and communicating a well built ethical atmosphere. Pillmore may be strict and enforce control to help the company; perhaps if the control had been maintained through corporate governance in the past, and if employees had been at ease in bringing issues to the fore front, Kozlowski would not have been able to send the company into the tailspin it has experienced (Cummins, 2006). MFSI can learn valuable lessons from Tyco; in conjunction with legal action and a...
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