Research Korner: Corporate Governance Examples

Explain how the adoption of effective Corporate Governance systems and processes can be positively affect company conduct and performance

Introduction This is an essay explaining how the adoption of effective Corporate Governance systems and processes can positively affect company conduct and performance. The following are the presentation of the issues to be covered by this essay: definition of terms used in this essay; the reason for the growth of interest in the subject; the way corporate governance operates in an organization; cooperate governance in relation to the corporate purpose and to business ethics. A conclusion will end the essay, summarizing key points in relation to the subject topic. This essay is in relation to the understanding of the author to corporate governance after studying several references and materials. The writer evaluated and used some listed organizations of United Kingdom and Hong Kong in order to demonstrate the analysis.  The following companies were used in order to demonstrate the answer for the good effect of effective governance, The Bank of China Limited, China Zenith Chemical Group, The Hysan Development Corp., Kee Shin Holdings Limited, Enron, Moulin Global Eye Care and CLP Holdings Limited. The author acknowledges the references used by providing a bibliography part at the end of this essay.             According to Chen (2004), there is good corporate governance and poor corporate governance. Good corporate governance provides proper incentive for the Board and the management to pursue objectives that are in the interests of the company, on the other hand, poor corporate governance can damage the interest of the parties involved. Corporate Governance is an issue attracting much attention in global strategic marketing. The need to analyze on how effective corporate governance systems and processes can positively affect a company’s conduct and performance will provide deep understanding oh how to incorporate governance in the system of a company.   Basic Definitions             The following are definitions of the words used in this paper. The definitions may derived from authorities of the subject or from dictionaries.             BUSINESS ETHICS - movement within a business or the movement to build explicitly ethics into the structures of corporations in the form of ethics codes, ethics officers, ethics committees, and ethics training (De George, 2003). CORPORATE GOVERNANCE – is the framework of rules and practices by which a board of directors ensures accountability, fairness, and transparency in the firm’s relationship with all its stakeholders. DIRECTORS – in general, person who leads, manages, or supervises an organization, program, or project. Specifically, person appointed or elected member of the board of directors of a firm who, with other directors, has the responsibility for determining and implementing the firm’s policy. He or she does not have to be a stockholder or an employee of the firm and may hold the office of the director. EXECUTIVE DIRECTORS – working director of the firm who is usually its full time employee, and has a specified decision making role as director of finance, marketing, operations, etc. on an on-going basis. NON-EXECUTIVE DIRECTORS – directors not classified as working director, and has no specified decision making. ORGANIZATION – social unit of people systematically arranged and managed to meet a need or to pursue collective goals on a continuing basis. STAKE HOLDER – person, group, or organization that has direct or indirect stake in an organization because it can affect or be affected by the organization’s actions, objectives, and policies.   Reason for the Growth of Interest in the Subject             There are various reasons for the growth of interest on conducting a single framework for effective corporate governance, According to Mohamad (2004), the term corporate governance came into vogue following the Asian Economic Crisis in July 1997 and has since been bandied about quite frequently in the business press. Furthermore, Calvin (2006) in his report stated that the Deutsche Bank Study concluded that, “The assessment of corporate governance standards is a valid measure of equity risk. There is a clear link between corporate governance and assessment and share price volatility, corporate profitability, and share price performance.             The author has derived three (3) reasons on why there is a growth of interest in corporate governance. The first one is that good corporate governance means a good conduct of business and hence the economy of a country will flourish. Second reason is that corporate governance will ensure that a corporation will unlikely to experience a problem or if cases of worst circumstances, will be able to survive any occurrence of dilemma within its organization. The author has included this reason because as the company continue to conduct its business it is inevitable that a corporation may not be able to experience any problem. The last reason is that the necessity to produce more positive outcome in the conduct of the business. Thru corporate governance, a corporation will be able to create policies and set up a framework in order to produce positive results for the company.              It is an interest with the diverse stakeholder groups, because these groups are mainly concerned with their own rights and capabilities is affected on the way the corporation is being governed. The main foundation of a corporation is the stockholder, which would in return must experience good return as to the value of its stocks. In order to provide a concrete example, The Bank of China Limited, in its Annual Report 2007, has reported that it continued to improve their corporate governance structure in accord to the principles of scientific decision-making and effective supervision. The bank also conducted its first annual general meeting which had provide excellent opportunities for communicating with their shareholders.             According to the study of About.com (2008), institutional investors in companies based in emerging markets claim to be willing to pay as much as thirty (30) percent more for share in companies that are well-governed. This was attributed to the fact that investors will have a stable return of income or profits as good governance will ensure that the business is also stable. The presence of the transparency of good corporate governance must be established not only based on the reports submitted but also with the way, it actually carries out its business. Effective corporate governance is perceived by consumer means that an organization renders services and offer products of high and best quality.   How Governance operates in an Organization             Several countries implements codes for effective corporate governance. The codes provide guidelines and policies in order for the listed companies create effective governance. In addition, the guidelines set a compulsory submission of annual reports as regard to the practice of the company. In order to illustrate how the factors that would affect corporate governance, the writer will put in some details one of the successful companies who have effective governance. Rudrum (2008) stated that the Cadbury Committee defined corporate governance as the systems by which an organization is directed and controlled, at its most senior levels, in order to achieve its objectives and meet necessary standards of accountability and probity. Governance operates in a corporation by creating rules and regulations on establishing board of directors that would explicitly handle the way the corporation will be manage. A chief executive director will head the board of directors, which is task to oversee the performance of the directors in relation to their function. The non-executive directors on the other hand will serve as the evaluator of the conduct of the executive directors in order to determine whether the executive director perform their conduct to the benefit of the corporation.             Hence, the effect of the corporate governance will be determined on how the corporation’s director will handle it functions. Asian Development Bank recognizes the principles that effective corporate governance requires partnership of the board and the shareholders and management as well as the interface with an array of stakeholders such as employees, the media, creditors, and suppliers. From this it can be inferred that the governance operates on how the corporation will be able to carry out its business for the benefit of the whole corporation, not only focusing on single matters that will only contribute a small amount to the effective conduct of the business. The corporation will benefit on the effectivity of its corporate governance if the directors will be efficiently handles its functions as what is required for them.   In order to illustrate the abovementioned statement, China Zenith Chemical Group Limited is a company, which has strategically moved to manufacturing coal, related chemical products from manufacturing petroleum refined chemical products. In observance to the Code of Corporate Code of Hong Kong, it adopted the principles laid down in order to safeguard the interests of the shareholders and enhance the corporate value and accountability. The directors of China Zenith do have different task that has been the reason for their continuous growth. The success of their strategic moved is attributed to the fact that they maintain regular dialogue with its investors and stockholders, hence, matters of resolutions, and questions as raised by the people in the company. It can be inferred from the practice of the company, that the adaptation of the principles laid down by the company was not only in its because the Hong Kong has provide stricter rules but also the principles laid down were all substantial hence it will make a company progress thru the improvement of its corporate governance.             According to Chen (2004), the study of corporate governance is about how authority originates in companies and how it is allocated amongst the parties involved. In business organizations a board was set up which comprises directors which will conduct itself in behalf of the company. The board will determine the risk to be assumed by the organization, whether it would be conducive to the business or not.     Hence, effectiveness of the corporation’s director is significantly needed to the corporation. According to the Business Round Table (1997), some of the functions of the board are to select and regularly replace the executive officer; review the major strategies and financial; plans of the corporation; advise management on significant issues facing the corporation and oversee the processes for evaluating the adequacy of internal controls, risk management and other financial matters and lastly nominate directors and ensure the structure and practices of the board provide for sound corporate governance.             On the other hand, the role of non-executive directors, according to the website ECGI, should scrutinize the performance of the management in meeting agreed goals and objectives and monitor the reporting of performance. The non-executive directors do the checking and balancing of such functions. The Hysan Development Company Limited has reported several numbers of awards they have received because of their efficient corporate governance. The company also reported in its 2007 Annual report that they established an appropriate check and balances into their governance structure, which include the need to designate a Senior Independent non-Executive Director.   The Code of Hong Kong requires independent non-Executive Director on the hand.  A director will be considered an independent director in pursuant to the requirements laid down by the Code. The INED need to comply with and operate with what is provided by the Code. As mentioned non-executive directors are tasked to check and balance the conduct of the excutive directors, the INED helps reduce reduce the possibility of fraud and improves the level of disclosure in financial reporting, in the performance of the Audit committee. As to the Renumeration committee, majority of members are INEDs.                         As aforementioned, the need to construct effective corporate governance will enable the corporation to conduct its business productively. However, there are number of companies that have been practicing poorly with their corporate governance hence resulting to their downfall. The writer will provide two companies as an example.             The fall of Enron is considered the worst occurrence of bankruptcy due to poor implementation of corporate governance. The fall of Enron, according to Munzig (2003), is attributed to the fact that there was a manifestation of the agency problem, that there were significant costs associated with the high-power incentive contracts with for the management, and due to lack of board independence, which has likely resulted to the management, rent extraction.             The writer have seen that the there has been an inefficient compensation packages with the company that has resulted into poor motivation and lack of dedication by the directors. Although the system acquired by the company was efficient especially in creating effective corporate governance, the practice of Enron has been no longer helpful to the company and has resulted to its downfall. As stated, the company will benefit to an its effective governance if it has been practicing the overall open dialogue for the directors and establishing a framework that would specifically put the directors in the perspective of achieving goals for the company.             The effectiveness of the corporate means that the policies and framework are also efficient. The efficiency of the policies and programs will determine how the corporation will be able to progress its business continuously. According to Gronow and Bache (2006), the case of Hong Kong based Moulin Global Eye care, which has considered discussions on restructuring after subsequently collapsing into liquidation after the uncovering of systematic corporate governance failures. The business of Moulin was in detrimental financial position that its based Asian-based operations cannot be saved.             The problem of Moulin was based on questionable transactions and financial statements that have brought such to the filing of a case against the company. The questionable transactions and a business that appears to be efficient nevertheless was no has brought disappointment to the creditors of the company. From that situation, it is right for the writer to say that the need to have transparency on all the company’s transactions is vital to the effectiveness of corporate governance. Hence, the need to have a constant evaluation on the corporate governance is necessary in order to run efficiently the company. As stated, the company must see to it that there is balance in the way it handles its business in relation to all the people having interest with the corporation.   Relation of Corporate Governance to Corporate Purpose, and to Business Ethics             According to Rudrum (2008), corporate governance is not solely about introducing systems of control, it is linked fundamentally to directing organization in order to achieve objectives. She further stated that corporate governance is critical to the success of the organization and is a central part of the role of the board. Corporate purpose is the goal and objectives of the corporation for the establishment of its business. In a corporation, its purpose determines the way and the system that a corporation must have to tract. The conduct of the corporation will also depends on its purpose, any deviation to its purpose means it did not handle its business efficiently or its system is not consistent with what its purpose has indicated.  Poor governance in a corporation means a negative result in the achievement of its purpose. In addition, as the directors carry out the policies of the corporation in pursuant on effectively managing the business, the actual implementation must not deviate to what the objective of the business is. Kee Shin Holdings Limited on its 2007 Annual Report stated that no amount of material uncertainties was found that might cast significant doubt about the Company’s ability to continue as its concern for the year. The company’s purpose is to have a continuous progress hence thru its effective governance there is no doubt that it has been maintaining the achievement for its purpose.               The relation of business ethics to corporate governance is important on how the corporation’s dealings. Business ethics is the proper conduct of a person in business transactions. The principles of business ethics are laid down as innate in the business market. According to the presentation of Mr. Greenwood, Director and Company Secretary of CLP Holdings Limited (2005) that their company promotes ethical standards because it is a practical steps in corporate governance. CLP has a code of conduct in order to use of objective industry standards for measurement and reporting. Hence, in effective governance the code of ethics must laid matters that would dictate the conduct of the members of the company tasking into consideration the right and wrong.               Conclusion             The adoption of effective corporate governance system and process can positively affects the company’s conduct, performance will depend on the way the directors, and how the people within the corporation will be able to manage its corporation. The cooperation of all the people involve in a corporation means that the governance is so effective in creating a harmonious system within the corporation. The relevance of a good structural framework and code of ethical framework will give an assurance that effective governance will likely to succeed. Also according to the report of ADB, from the vantage point of institutional investors, good corporate governance is a key risk management tool that helps preserve and grow capital in ways compatible with their values. Good corporate governance is considered a great weapon specially in attracting investors, and consumers.             The writer therefore concluded that the adoption of effective governance would make significant positive results to the conduct of business of a corporation. The company will have a better decision making and will improve the access to financial matters. The shareholders on the other hand will be able to be protected from abuse of fraud and other matters that would prejudiced their interest to the company. The communication within the company will be open hence; matters need to be address will be taken into consideration immediately.   BIBLIOGRAPHY BOOKS   Chen, J. 2004, Corporate Governance in China, RoutledgeCourzon, New York.   De George, R. 2003, A History of Business Ethics, 2008 Markkula Center for Applied Ethics.   JOURNALS   Gronow, N. & Bache, S. (2006), Distressed Debt in Asia, Ferrier Hodgson, 27 July.     ELECTRONIC RESOURCES   A Premium for Good Governance 2008, About.com, viewed 27 May 2008, <http://retailindustry.about.com/gi/dynamic/offsite.htm?zi=1/XJ/Ya&sdn=retailindustry&cdn=money&tm=348&gps=100_174_1020_510&f=00&tt=14&bt=1&bts=1&zu=http%3A//www.mckinseyquarterly.com/article_abstract.aspx%3Far%3D1205%26L2%3D39%26L3%3D3>.   Business Dictionary 2008, Business Dictionary Online, viewed 27 May 2008, <http://www.businessdictionary.com/>.   Calvin J. 2006, Corporate Governance Development in the UK and Continental Europe, viewed 27 May 2008, < http://www.allbusiness.com/business-planning/business-structures/4083418-1.html>.   China Zenith Chemical Group Limited 2008, 2007 Annual Report, viewed 30 May 2008, < http://www.irasia.com/listco/hk/chinazenith/annual/ar20499-ew00362.pdf>.   CLP Holdings, 2005, Best Practices in achieving Good Corporate Governance – a practitioner’s Perspective, viewed 29 May 2008, <http://sc.icac.org.hk/gb/www.icac.org.hk/hkedc/leader/p4.html>.   Corporate Governance Principles, 2008, Asian Development Bank, viewed 27 May 2008, < http://www.adb.org/documents/brochures/corporate_gov/corporate_gov_principles.pdf>.     Hong Kong Market 2005, Hong Kong Institute for Monetary Research, viewed 27 May 2008, <www.hkimr.org>.   Hysan Development Company Limited, 2007, Annual Report 2007, viewed 29 May 2007, <http://203.194.162.10/listco/hk/hysan/annual/index.htm>.   Kee Shing Holdings Limited, 2007, 2007 Annual Report, viewed 29 May 2007, http://203.194.162.10/listco/hk/keeshing/annual/index.htm>.   Mohamad, S. 2004, the Importance of Effective Corporate Governance. Viewed 27 May 2008, < http://ssrn.com/abstract=617101 >.   Munzig, P. 2003, Enron and the Economics of Good Governance, viewed 29 May 2008, < http://www-econ.stanford.edu/academics/Honors_Theses/Theses_2003/Munzig.pdf>.   Principles of Corporate Governance, 2004, OECD, viewed 27 May 2008, <www.oedc.org>.   Rudrum, J. 2008, Understanding Governance, ACCA, viewed 27 May 2008, < http://www.accaglobal.com/members/publications/accounting_business/archive/2008/march/3077388>.   Surveying the First Half-yearly Financial Reports, 2008, Deloitte UK, viewed 29 May 2008, <http://www.deloitte.com/dtt/article/0,1002,cid%253D192412,00.html>.   The China Bank Limited, 2007 Annual Report, viewed 29 May 2008, <http://202.66.146.82/listco/hk/boc/annual/2007/ar2007.pdf>.

Explain how the adoption of effective Corporate Governance systems and processes can be positively affect company conduct and performance

Introduction This is an essay explaining how the adoption of effective Corporate Governance systems and processes can positively affect ...

STAGES OF CORPORATE CITIZENSHIP IN DOW CHEMICAL COMPANY

STAGES OF CORPORATE CITIZENSHIP IN DOW CHEMICAL COMPANY             The Dow Chemical Company is a leader in providing innovative chemical, plastics and agricultural products and services. Currently, Dow sits at the second largest chemical manufacturer in the world. The social and operational movement of the company will be analyzed through:   A.           Citizenship Concept (Stage 5 – Change the Game)             Dow embraces its role as a corporate citizen and commits at being a strong influence of positive change. Evidently, Dow ranked first in corporate governance in five consecutive semi-annual assessments. Corporate citizenship in Dow is well-realized by the employees, retirees, their immediate communities, end-users of the products and the governments and municipalities ( 2006).             In 2006, Dow supports a variety of program directed towards improvement of education, health, culture and government among others. Continually, Dow pledge at developing products essential for human progress and focusing on fitness and well-being of the people ( 2006). B.           Strategic Intent (Stage 4 – Value Proposition)             Functional leadership, providing metrics through systems and data, the delivery of most effective technology (MET) (2007) and balance the internal investments are the core strategic intent of Dow. In particular, the integrated approach leads to two primary strategic focuses on leveraging the modern technology or eCommerce: 1) increase efficiency of value chain through eProcurement practices and 2) build new businesses that will develop low-cost alternative channels and creating new solutions-oriented ventures. Currently, Dow has been attempting to integrate e Strategies into their planning and employ a flexible approach in governance to keep with the evolution of strategic focus through adjusting the models (2000).     C.           Leadership (Stage 2 – Supporter, in-the-loop)             Leadership organizations within Dow ensures that decision-making is placed at the proper level and purports that proper checking and balances are in place. The Board of Directors are responsible for conducting thorough review through solid and diverse experiences and credentials. The board also embodies the corporate governance guidelines, codes of business conduct and financial ethics. The corporate officers support the board and occupy the management role ( 2007). D.        Structure (Stage 3 – Cross-Functional Coordination)             As a publicly traded company, Dow is governed by stockholders. The organizational practices include electing and voting and setting of schedule and agenda. The executive body and the five committees consistently communicate with stockholders and support each other towards achieving strategic priorities and organisational goals (2006).             Particularly, Dow Company is engaged in succession management. Working processes at Dow involves the CEO, the vice-president of human resources and the Workforce Planning Strategic Center. When Dow implements the work process, they continually refine and adjust company’s systems.  As well as soliciting feedbacks from the line executives, monitoring developments of new technologies and learning from other leading organizations (2007).  D.           Issues Management (Stage 4 – Pro-Active, Systems)             Member control, the company’s capabilities in evaluating its environmental and social impacts fall short and the company lacks in policy and systems of handling complaints on operational level are some of the issues faced by the management (2006).             In 2005, Dow launched the Managing Issues website wherein employees can communicate their sentiments/concerns to the management. This provides the employees a resource to learn company issues and Dow’s top public issue priorities. The site aids at aligning actions to Dow’s corporate strategies and reflects the focus on preserving Dow’s values and integrity (2005). E)        Stakeholder Relationships (Stage 3 – Mutual Influence)             Stakeholders identified by Dow includes stakeholder who have a need and who gets credit for the work and funding, decision and beneficiary stakeholders (2007). Dow upholds their reputation through strengthening of the stakeholders’ relation and engages them in the process.               In Dow Company, external stakeholders are actively involved in line with their commitment of seeking input and promoting partnerships. The company facilitates meeting Corporate Social Responsibility (CSR) targets and community engagement. Dow Chemical institutionalizes external stakeholders in corporate decision-making ( 2006). E.           Transparency (Stage 3 – Public Reporting)             In 2006, Dow Chemical ranked sixth for their transparency capability (30%). The commitment of the company aspires from one of its ‘Guiding Principles of Sustainability’ ( 2006). The company is committed to sound governance through the management and independent auditors in meeting competence and integrity ( 2007).             Evidently, the Dow Company is in positive and improving direction. The combination of its reputation, resolving priority issues and strengthening the stakeholders’ relationship is the three interrelated actions (Around Dow, 2007) which shape the culture of Dow. The company also converges its strategies with the maximum use of the modern technology in incorporating corporate citizenship efforts.  Thus, the employee engagement and stakeholders participation is always available.

STAGES OF CORPORATE CITIZENSHIP IN DOW CHEMICAL COMPANY

STAGES OF CORPORATE CITIZENSHIP IN DOW CHEMICAL COMPANY The Dow Chemical Company is a leader in providing innovative chemi...

Strategic Planning and Implementation of Sony Ericsson

Part 1 Sony Ericsson, its resources and its competencies   In 2000 Ericsson and Sony established a London-based joint venture, Sony Ericsson, to exploit the opportunities of third generation mobile systems, whose implementation had begun in Japan. Ericsson's strategies were broadly emulated by its major competitors in the world telecom industry, including Nokia, the Canadian firm Nortel, the US firms Lucent, Cisco Systems, and Motorola, and Germany's Siemens, all of whom had telecom equipment sales in excess of $22 billion in 2000. These firms all moved, although at varying rates, to outsource production to contract manufacturers. They also progressively outsourced innovation to cheaper locations (Wallach 2005).   Resources Sony Ericsson’s resources come from reliable suppliers and manufacturers.  The materials used in creating the products have to agree with the company’s greenheart process wherein most part of the product should be recyclable or harmless to the environment.   Financial The funds can either come from the parent company or from other sources like investors. The budget will be used to pay for the different expenses of the firm. The budget will be used to pay for the rent expenses, the payment for all the employees, the cost of supplies used in creating the products, the cost of electricity, the cost of office materials and other costs or expenses.   Human In providing excellent service to the clients, a company needs to have a dedicated staff that performs well and knows that the service they give to the client can help the company have a positive or negative image. The staff of the company is well trained to ensure that the best service can be given to the clients. The company makes sure that it hires promising individuals that can assist in the company’s task of reaching their goals.   Skill The personnel of the Sony Ericsson are well skilled in creating and selling their products.  The company makes sure that they hire individuals who are skilled in management, manufacturing or selling.  The company also looks for various activities that will help them improve their skill.   Competencies Core Capabilities   Sony Ericsson’s core competences include its highly advanced product, competitive products and concept of sustainability. Sony Ericsson makes use of its competences to achieve continuous growth and development   Distinct Capabilities Sony Ericsson’s distinct capabilities include its ability to create products that costs lesser than other cell phone.  The company’s product cost less but it is durable like the other company’s products.   Scope Capabilities Sony Ericsson’s capabilities include its use of sophisticated technologies to create the best product. Sony Ericsson has commendable personnel that were well trained to create the best product and provide efficient service.   5m’s Money Sony Ericsson is well funded. The funds of the company come from its profits, capital and from investors. The company makes sure that its finances are well budgeted and will go directly to the division that needs it the most.   Minutes Time is important for the Sony Ericsson. The company gives importance to time just like it gives importance to finances and human resources. The company has organized schedules that will ensure that products can be made at an appropriate time. The company makes sure that every member of the organization has a balance of work and rest.   Materials Sony Ericsson’s materials come from reliable suppliers. The company keeps the materials in reliable storage areas. The company makes sure that its materials will not harm the environment and can still be recycled.   Manpower Sony Ericsson makes sure that it hires the best personnel that have an idea on the cell phones and its related products. The company engages in online recruitment, personal recruitment and the use of third party to recruit and choose the personnel that fit their needs.   The company trains the personnel in accordance with their tasks and role. The company allows their personnel to attend seminars that will increase their knowledge on their forte. The company makes sure that the personnel are given an appropriate compensation based from their role and contribution to the firm. The company makes sure that all social benefits are received by the personnel.   Machines The company makes use of the best machinery to create the products. The company has a research division that searches for the latest technology that will help them achieve efficiency and effectiveness in creating their products.  The machines are well maintained by a special group of personnel. The company makes sure that the machines are regularly checked for problems.   Implications on Management The use of 5m’s makes it easier for the management to operate the firm. The use of 5m helps Sony Ericsson and its management to focus on strategizing and determining what acts will provide benefits to the company.  Through the 5m the management receives assistance in attaining the goals of the firm.   Current strategies of the company The company is focused on the use of sustainable products. Sustainability is said to be the act of maintaining supplies for future generations.  Supplies do have its own limitation; it will run out of stock eventually. Through the use of sustainability companies can make sure that there can be supplies for the present and the future.  Sustainability goes with the need to have green supplies. The company makes sure that it uses sustainable supplies. The company makes sure that its supply will not run out.  The makes sure that the materials they use are recyclable and will not cause damage to the environment. To maintain the sustainability of supplies the firm makes sure that parts can be recycled.   Stakeholders Internal stakeholders The internal stakeholders of Sony Ericsson include the management of the company, employees and creditors. The Stakeholders’ impact on the governance of the firm is it affects the way the company is managed. It makes sure that the company performs well according to the stake holder’s standards.  The management of the firm is a stakeholder because the company’s success or failure is conjoined with the management’s success or failure.  The employees of the firm are stakeholders because the success or failure of the firm will impact their salary and its increase or decrease. The creditors are stakeholders because they contributed a certain amount that contributes to the financial resources of the company.   External stakeholders The government, clients and potential investors are those groups that are external stakeholders to the company. The government is a stakeholder for the firm because they are the ones that checks if the company follows regulations and laws.  The government also observes for any negative effect for the company’s products. The clients are stakeholders because they are the ones that are affected by any changes initiated by the company.  The clients are the end destination for the product, thus they need to know what stages a product goes through before it reaches them. The potential investors are stakeholders because they observe the financial status of the company and use this as a basis for any transactions that they will do with the company.   Stakeholder’s strategy             The stakeholders provide assistance in running the firm. They give a little feedback on how the firm should operate. The stakeholders give their opinion on the company and the condition it faces.   Future strategy for stakeholders The future strategy for the stakeholder will focus on improving their relationship with the company. This can be done through the use of communication systems that will create a greater bond between the firm and the stakeholders. The communication strategy can be in the form of internet or other online system.   Governance Chain Corporate governance is concerned with holding to account the modern corporation, whether it is a large or small holding company and subsidiaries, listed, private, government or non-profit entity. One influential interpretation of corporate governance is to find a way to maximize wealth creation in a manner that does not impose inappropriate costs on third parities or on society as a whole. Corporate governance application requires a system of checks and balances designed to define appropriately the parameters of authority through accountability (Kakabadse 2001). The following presents the governance chain for the company. The key players include the stakeholders, board of directors and the employees. The stakeholders, board of directors and employees are the ones that will be affected by any change in management strategy.  Any changes in management strategy can affect the service given to the stakeholders. Any changes in the management strategy can alter the position and responsibility of the management team and the personnel. The beneficiaries of any change in the management strategy include the clients and the government. The clients are beneficiaries because any change in the management strategy can lead to better service to them and it can lead to the emergence of better products.  The government is a beneficiary of the change in the management strategy because they can now make business dealings with Sony Ericsson. The government can ask the company to make products that fits with their communication needs. This in turn can help the government provide better service to their constituents and deal better with outside forces.   Principal- Agent Theory The management and the employees have a principal – agent relationship wherein the managers give fair treatment of the personnel. The managers make sure that the personnel acts as agents of providing service to clients.   Employee Unions Worker Unions are vital because it gives personnel the chance to express his/her concern to other workers. The union can be used for one personnel to have better benefits and compensation from the firm. The management allows for unions and other groups that intend to unite the ideas and concerns of the personnel. The management makes sure that they respect any union that the employee has formed or joined.   Sony Ericsson ethics and Social Responsibility Corporate responsibility is a pact for the mutual benefit between society that needs business for economic and social development, and business that needs a supportive business environment. It is also a pact between capital and management in modern companies, which has been as shaken up by some recent scandals where management disregarded the bond of transparency with shareholders (Dunning 2003).   a. within Sony Ericsson Sony Ericsson has and believes in corporate responsibility. The company makes sure that it follows all laws and regulations in every country they operate in. It has procedures and processes that make sure that corporate responsibility is implemented not only in internal environment but within its suppliers and trading partners. Sony Ericsson gives much importance to their personnel; the company makes sure that the welfare of the personnel is given appropriate attention.    b. what can still be improved Sony Ericsson can improve its social responsibility by engaging in charitable works such as donation to charity or other non government institutions. They can even create a charity that will focus on a certain market. Sony Ericsson can improve its ethical standards by reviewing its current scandals and adjusting it towards the current situation.  c. alternatives philosophy Aside from the use of corporate responsibility and ethics, Sony Ericsson can make use of the fair competition philosophy wherein the company will make use of strategies that will be just and fair. The company will refrain from committing acts that are demeaning to fairness in the telecommunication industry. The company will refrain from engaging in unwanted acts against other cellular phone companies.   d. Freedmanism Freedmanism is the belief in ideas such as Deontology, Utilitarianism, Teleology, Egoism and Ethical relativism. Deontology is the philosophy that focuses on the rightness or wrongness of intentions or motives behind action such as respect for rights, duties, or principles. Utilitarianism is the belief that the worth of an action is determined by its contribution to overall use of that action. Teleology is the belief that things are designed for or directed toward a final result.  Egoism is the idea that people should do that they think satisfies their self interest. Ethical Relativism is the belief that ethical ideas do not reflect objective and/or universal moral truths. All the ideas under Freedmanism relates to different characteristics of the personnel. The limitation of Freedmanism revolves on the contrasting characteristic of each belief under it. Deontology, Utilitarianism, Teleology, Egoism and Ethical relativism each have a characteristic that contrasts the other, the use of it under one philosophy can create confusion and does not help in making one productive and efficient.   The management strategy that will be changed Expanding into additional segments, after reaching an acceptable market share position in the primary market is a prudent option. The common strategy is to penetrate with either line extensions or technology applications. It is an acceptable and logical move for a market leader particularly in a flat market. It's only advisable though if sufficient resources are available to penetrate the new segment and, providing sufficient management attention and resources are available to vigorously protect the primary segment (Paley 2006). The target market of the company involves almost all sectors of the society. The company aims to provide mobile products to young or old, boy or girl. The company as much as possible aims to reach all walks of life. This target market is a good source of income. The company has different strategies that can cater to the taste and appeal of such markets.  The change in management strategy will focus on increasing the market of the company. In increasing the market the company will need to make sure that the stores where its products are located will be in the most profitable places. The distribution stores for the products should be in places where clients can easily see the store and they can be encouraged to visit the store and buy products.  The distribution store should make sure that competition in the location they want to put up the branch will not be too heavy. The market of the company can still be expanded to accommodate the elder people market. The company can consider such clients as a different segment that should receive a different kind of product. They should also provide a different kind of mobile products for such market.   Part 2 Tradeoffs The change in strategy would help the firm gain more clients and increase its income. The change in strategy would help the firm improve its status in its industry. The potential problem with changing the strategy is a situation wherein the firm would lose control over its current markets. The new market would keep the company busy and may cause it to neglect the older markets.   Nature of People   Purpose Ambitions and objectives are formulated at three levels. For the long term, guiding objectives are important. For the short and medium term, a system of measurable objectives must be created. Finally, the actual missions are the concrete translation of those objectives to the social players involved (Keijzers 2004).  Communication is a key element of establishing focus, because employees usually perform better and accomplish more when they understand their role and how it relates to the bigger picture (Zwell 2000).   In setting the objective a clear picture of the internal and external environment was used by the firm. The environment showed the firm its weak points or problem areas. Through knowing its weak points the company was able to plan for future possibilities and future plan of actions. After the company knew its weak points it was able to create the objectives by determining the weak points or problem areas that should be given top concern and priority.  The company engaged in constant communication to determine what will be their objectives. To further identify the nature of the objective of the firm the lynch polygon will be used. Lynch’s Polygon of purpose Timing Sony Ericsson’s plan for change should begin as soon as it has enough funds and resources to introduce the change. The company cannot wait for too long before it introduces the change because the new strategy might not fight the future situation.   Innovation Sony Ericsson is one company that has proven its innovativeness through combining cell phones with walkman functionality.  The company can use such innovativeness to create more products that will be accepted by the market. Value Added The innovative nature of Sony Ericsson adds value to their products. If the company wants to show that they have value then they need to prove it by creating more innovative products and services.   Survival Survival in the telecommunication industry can be achieved by innovation and the use of appropriate strategies. Sony Ericsson is already innovative, it just needs to make sure that it will use appropriate strategies or make new strategies to continue to survive in a competitive cell phone industry.   Growth One goal of Sony Ericsson is continuous growth. The company has already risen from its humble beginnings but it still wants to reach better heights. To do that the company needs to focus on the new strategy and defend itself against competitive traps.   Brand Apart from each other Sony and Ericsson has created a name for themselves in their respective industries. Together they have become one of the biggest cellular phone companies. With proper use of marketing strategies and the use of unique packaging, the company can still create a more unique brand that can create a huge impact on the cell phone industry.   Leadership Sony Ericsson has good leaders that have guided them from their birth up to this day. The current and former leaders have helped the company make a name for itself in its field.  The leaders of the firm are one reason for its success and they are the ones that can truly guide the company to its objectives.   Stakeholders The stakeholders are a vital group that contributes to the success of Sony Ericsson. Their guidance and assistance have helped the firm achieve its current status. Without the stakeholders the firm will lose its focus and will do things unnecessary for its survival.   Value and Lifestyle The company has achieved its current status because it was able to maintain its value at the same time it introduced new trends that increased its value. The company has achieved a household status and is becoming a need rather than a want.   Knowledge Sony Ericsson values the gathering and use of knowledge.  The company makes sure that through its research and development division it gathers the data that it needs to survive its environment. The company uses knowledge to innovate its products and services. Time Time is of the essence. All planned actions of Sony Ericsson should be implemented so that the company can reap its benefits and initiate changes if there is such a need for it.  The company cannot afford to delay the implementation of the new strategy since the new strategy was only made for the current situation of the firm.   Company Mission   Evaluation An innovative organization must be led by a leader who develops and aligns the organization with the mission and vision, develops and maintains trust, ensures that coordinating and communicating occur, and encourages creativity and learning (Oden 1997).At the heart of the innovative culture lies the vision of the leader. This vision includes the broader sense of who the company is, why the company is doing this work, why it's important, the promises they have made to customers, and the code of conduct (Cook Jr. 2000). The mission and vision should definitely be consistent and supportive, but they will not be exactly alike since they serve two different purposes (Kanji 2002). Sony Ericsson’s mission statement concentrate on making sure that the company will produce the most attractive products.  This mission statement fits well with what the company is doing and showing to the public.  This mission statement can still be used to achieve the company’s overall goals.  Sony Ericsson has partly achieved its mission because it has created a wide array of eye catching products that are globally competitive and full of innovation.   Evaluation of mission statement against the five elements   Innovation   The mission statement of the firm has innovation as its core. The company innovates to achieve its mission. In every aspect of the firm, innovation is the concept deemed as most vital.   Brand The company has made sure that it is known all over the world. The company has established itself on various parts of the world. This coincides with the firm’s mission of having a global identity.   Growth The firm already has fully developed and grown it can be seen through its global brand. Sony Ericsson’s worldwide fame proves that the firm has achieved some basic goals and it has matured from its initial identity.   Stakeholders The company works with the stakeholders in achieving growth and development. The stakeholders boost the company for it to achieve its goals and compete well in its industry.   Value and Lifestyle Sony Ericsson wants to be attractive. They have achieved this mission through producing unique products that catches one’s attention.   References Cook Jr., WJ 2000, The art and science of holistic strategy, Quorum Books, Westport, CT.   Dunning, J 2003, Making globalization good: The moral challenges of global capitalism, Oxford University Press, Oxford, England.   Jones, G 2005, Multinationals and global capitalism: From the nineteenth to the twenty-first century, Oxford University Press, Oxford.   Kakabadse, A 2001, The Geopolitics of governance: The impact of contrasting philosophies, Palgrave, New York.   Kanji, GK 2002, Measuring business excellence, Routledge, London.   Keijzers, G 2004, Government and sustainable development, Routledge, New York.   Nielsen, RP 1996, The politics of ethics: Methods for acting, learning, and sometimes fighting with others in addressing ethics problems in organizational life, Oxford University Press, New York.   Oden, HW 1997, Managing corporate culture, innovation and intrapreneurship, Westport, CT, Quorum Books.   Paley, N 2006, The manager's guide to competitive marketing strategies, Thorogood, London.   Wallach, B 2005, Understanding the cultural landscape, Guilford Press, New York.   Zwell, M 2000, Creating a culture of competence, Wiley, New York.

Strategic Planning and Implementation of Sony Ericsson

Part 1 Sony Ericsson, its resources and its competencies In 2000 Ericsson and Sony established a London-based joint venture, Sony ...

Annual Report Commentary : The Case of PetroChina

Corporate Governance The firm adopts internal control system to comply with listing requirements in Hong Kong Stock Exchange (HKSE) and applicable provisions in US particularly on Sarbanes-Oxley Act.  Through time, the company enhances its control system with the vision of creating an integrated model corporate-wide.  An illustration is the improvement in communication between different stakeholders with top-management and different committees in one hand and shareholders on the other.  PetroChina ensures a transparent corporate governance structure to the benefit of different stakeholders.  Shareholders especially those who have minority stakes are protected while managers are confident of continuous employment.   With this, capital inflows will remain stable at minimum and managers will not engage in irrational expansion in order to increase pay or retain their positions.             To assure that directors and supervisors do not engage in anomalous transactions, the firm embraces the Code of Governance Practices including the Model Code for Securities Transactions.  Stakeholders and the capital markets in general are protected from sub-optimal outcomes observed in insider trading.  Top-management who has the personal interest in the growth of the company avoids excessive trading and exposing high risks against the firm.  When insider trading looms, there is a problem that aggressive strategies will be implemented without investment protection.  As it would lead to short-term price gains, long-term investors are at risks.  However, the only assurance that top management follows the Codes is a confirmation.  There should be a background check.             Directors are required not to have family, financial and other substantial relationship with other directors/ executives.  This will reduce decision bias especially in times of vote instead objective and value judgment.  The Board is consists of a Chairman, a Vice Chairman, an Executive Director, six non-executive directors and three independent non-executive directors.  Independent directors are outnumbered which makes them less influential.  As their decisions are highly external and detached from the firm, innovative and original ideas may not be well-established.  Committees in Audit, Remuneration and Investment are also appointed by the Board which is highly controlled by internal directors.  With the opportunity of re-election, the three year expiry date of Board’s tenure can be extended thus the problem is carried-over the long-term.             Remuneration of the Board is not shown in the page “Remuneration of Directors”.  The page merely tells how the President and other non-director executives are appraised and remunerated.  This issue would tarnish the standing of the Board in corporate decisions since their compensation is not shown.  Anomalies that might be happening will not be obvious to investors and collusion might not be halted.  The good thing though is that two external directors chaired the Remuneration Committee which imposes strategic compensation to corporate officials.  However, this is organization is undermined by requirement of using the Board’s Work Plan as framework for the procedures of this Committee.  Independent intervention is reduced rather than supported.             Nomination of Directors is initiated by shareholders with at least 5% of the voting shares of the company.  A candidate will gain office if at least 50% of the voting shares favored in his/ her part.  This practice can have positive impact to gaining consensus of who will take the high posts in the Board.  This will also safeguard the majority of shareholders including those who have only minority stakes.  The absence of nomination committee, however, reduced the promotion of shareholder voting rights and optimal lists of potential director.  When it comes to external auditors, the company hires the PriceWaterhouseCoopers that received at least RMB140 Million during the reporting year.  It is a sign of impartiality as the selection of the external/ international auditor arises from the shareholder’s meeting.  However, there is much to do in the part of regulation committees to assure that collusion is not a threat.   Evaluation of Financial Strength and Weakness After increasing its liquidity in 2005, the firm experienced a drop in the most recent reporting year.  This means that it has minimal liquid assets to cover for sudden demands from short-term creditors.  Inventories may likely play the large role in filling-up current asset needs.  Both gross profit and operating profit margin declined during the three-year period.  It indicates that the cost of raw materials, managing operations and other expenses are increasing.  Although revenues are also rising, the rate of its increase is lower than expenses.  The same trend of liquidity is shown by ROA and ROE.  The decline in 2006 means that some assets or businesses are not earning optimally and this would result to reduced chance of increasing the wealth of shareholders.  In totality, profitability measures are not presently favorable.             As revenue increase, the efficiency of fixed assets is enhanced.  However, this improvement in fixed assets is primarily invoked by depreciation.  This is observed in the diminishing value of fixed assets from 2004 to 2006.  Thus, the rise of revenues aggravated the improvement in efficiency.  The firm is also deriving its value more on assets and equities rather than on debt.  This is an important position to the firm to avoid finance costs that can pressure its revenues.  This fact is supported by a stable, although reduced, interest coverage ratio.  It indicates that the firm has sufficient cash through its earnings to pay interest obligations.  In effect, its operations remain safe and not limited by financial obligations.  Although the percentage EPS fell in 2006, the dollar EPS continuously to increases.  This means that a dollar in earnings of the company will result to RMB 0.79 to every investor.  This trend is lucrative to shareholders.             From the stock price of HK$6 per share in 2006, the firm has been able to reach HK$15 per share in 2008.  This means that the firm faces an increasing demand from investors to buy corporate stocks.  This can also mean that its future forecast of performance is attractive.  This admonition has positive connection with the level of corporate governance of the firm which is enhanced by adopting several governance standards.  Distribution of dividends is affected by numerous conditions before declaration from the Board.  Main factors involve are general business conditions, financial results, capital expenditures, restrictions from contracts, company’s debt standing and others which are not explicitly but potentially identified by the Board in the future.  Due to this, shareholders are not assured of a specific payout will be made.             In the short run, as shown in the spreadsheet, stock price is very volatile.  This is the daily data from December 1, 2007 to January 14, 2008.  Serving zero as the mean for the price changes, increases and decreases seemingly have equal contribution to the current price.  Valuating through technical analysis, the changes in daily stock prices of the firm is justifiable.  Further, based on fundamental analysis, the increases in stock price have support.  The demand for oil in China will increase to the extent that it will replace Japan in the second rank for largest oil importers.  The volatile changes in price show the reaction of the market about the uncertainty on the part of the company to supply the needs of the country.  The volatility also indicates how corporate governance in the firm hedges the influence of government officials to its direction.  In effect, the improving leadership in the firm places investors in a “trusting stance”.              With market cap of at over 3 Billion and classification as one of the largest companies in China and Hong Kong, PetroChina and Sinopec are comparable to each other.  PetroChina overtake the profitability over Sinopec as the former has far higher margins than the latter.  This means that the business of PetroChina is more income-generating than Sinopec.  ROA and ROE is much like the same.  Sinopec is able to improve in the by-quarter performance against PetroChina but still below the latter.  PetroChina does not only invest on profitable assets but also holds its promise to provide wealth to shareholders.  Even with far larger employees of PetroChina compared to Sinopec (e.g. 400,000 versus 20,000 approximately), the former does not have any inefficiency signs.  On the other hand, Sinopec is seemingly overpriced as it has bigger P/E ratio.   Projection  The continued improvement in PetroChina’s control system will increase the marketability of its shares.  The gradual relaxation of capital market restrictions will also provide increase in marketability.  External auditor in the likes of a global player being PriceWaterhouseCoopers is also vital to create a positive impression from international and institutional investors.  However, the key to long-term success of PetroChina with respect to marketability of its shares is that transferring its leadership to the private sector.  As government can command investors and business partners, there is a looming consideration about competition in the oil industry which can reduce the potential of the company.  As example, oil prices in Hong Kong and China may be lower due to competition.              The financial ratio of the company will continue to be strong.  Its liquidity will continue to confront volatility as the value of its assets is stored mostly on its oil reserves.  It should be considered that oil stocks are products that can be used as hedging to normalize price.  As the company is controlled by the government, the prices are able to obtain stable prices because of playing the law of demand and supply field.  Profitability will also be volatile in the following years.  This is particularly true in the oil industry where changes in world prices affect the local prices including the conditions of the industry and also the bigger economy.  Thus the company must rely on its efficient assets to hedge the risks of these volatiles which would likely be delivered in the future.  Gearing and investment potential will serve as trade-off to each other.  When volatilities emerge and debt financing is hard, equity financing will be tapped.             Access to equity financing is not that hard because of the stock price of the company is attractive.  Although issuance of dividends is confronted with several issues, increasing stock price is somewhat within the promise of the firm to increase investor’s wealth.  In competition, the firm is superior to its closest rival that indicates its capital s well as its product market potential in the future.  Ensuring its competitive advantage in the industry that is likely provided by the protection of government, it can continue a favorable business and financial environment in the long-term.  It is however a caution for the investors not to consider the increasing role of free markets in socialists countries.  When China decided to encourage oil producers worldwide due to high demand, there is a big chance that the company will lose substantially in the market.       Recommendations Sustainable competitive advantage is a firm’s position wherein it creates and implements a value-creating strategy and competitors are unable to duplicate or find it costly to imitate.  On the other hand, stakeholder management consists of activities such as planning, organizing, controlling and evaluating individuals and groups who can affect or are affected by firm’s strategies with enforceable claims over its results.  Although stockholders or the investors in a firm serve as the key stakeholders for United States and United Kingdom corporations, there are times that other stakeholders are prioritized because of there impacts in the firm’s operations and strategy such as banks (capital market stakeholders), customers, major and minor suppliers, host communities, unions (product market stakeholders), employees, managers and non managers (organizational stakeholders). Effective stakeholder management is primarily an outcome of top-level managers’ ability to build, maintain and rebuild culture, ethics and reputation within the firm.  These activities, as a prerequisite, should be in line with organizational intent and mission that ultimately serve the purposes of stakeholders in general and shareholders in particular.  Installing sound stakeholder platforms will give managers the required flexibility and leverage to minimize the adverse impacts of trade-offs between two stakeholders.  For example, when the firm is known to be a good debtor as it perpetually pays its due obligation on time, banks and other capital markets will place the firm into more relaxed contracts that in turn aids the firm to easily finance projects.  The culture will mount the chain of behavior, ethics will polish it and reputation will keep it shining to lure stakeholders in reaching organizational objectives. Finally, stakeholder management towards sustained competitive advantage is the task of both top-level management and directors.  The CEO is highlighted in this veil because shareholders positioned him to function as the manager of the entire firm activities.  A new product in the market, a new supplier policy, allocation of funds to minimize environmental hazards and transparency of financial and business performance are engaged because of his decision-making latitude.  However, managerial opportunism lurks around the corner, which in turn, undermines sustainable competitive advantage in favor of self-vested interests.  Thus, directors, the trusted representatives of shareholders to oversee firm operations for them, are given the budget and authority to control the emergence of such.  Without these two groups involve in stakeholders’ supervision, stakeholders’ value will result to unnecessary and unintended grievance to another in favor of an isolated interest of few.

Annual Report Commentary : The Case of PetroChina

Corporate Governance The firm adopts internal control system to comply with listing requirements in Hong Kong Stock Exchange (HKSE) and ...