Business & Professional Ethics Notes

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Business & Professional Ethics Notes
Chapter 5: Corporate Ethical Governance & Accountability
Modern Governance & Accountability Framework- To Shareholders & Other Stakeholders
New Expectations- New Framework to Restore Credibility
• A corporation’s reputation could be significantly affected by irritated stakeholders
• Enron, Arthur Andersen, and WorldCom debacles showed the world the faults and vulnerabilities inherent in the old style shareholder-only governance and accountability model
• They showed that corporate activities designed to favour current executives, directors and some shareholders were not necessarily in the interest of future shareholders or current shareholders who wished for long term success such as pensioners-investors, employees, lenders and other stakeholders
• Fiduciary Obligations of Boards of Directors: sits at the apex of a company’s governing structure o Include reviewing the company’s overall business strategy, selecting and compensating the company’s senior executives, evaluating the company’s outside auditor, overseeing the company’s financial statements and monitoring overall company performance
• Based on the reality of the stakeholder pressures and the desire to encourage stakeholder support, corporations realize that they are strategically accountable to stakeholders if not legally and are governing themselves to minimize the risks and maximize the opportunities inherent in the stakeholder accountability framework
Governance for Broad Stakeholder Accountability
• Governance Process Based on Stakeholder Interests o Stakeholder-accountability oriented governance process (SAOG): board of directors must take all stakeholder interests into account and make sure that they are built into the company’s vision, mission strategy, policies, codes, practices, compliance mechanisms and feedback arrangements o Ford/Firestone Tire Recall illustrates the problems that there was not enough emphasis on customer value or safety, or

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