Corporate Governance and Ethics Research paper 2022

Running head: CORPORATE GOVERNANCE AND ETHICS
CORPORATE GOVERNANCE AND ETHICS
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Executive Summary
The paper will discuss the corporate governance and corporate ethics of the company. For the
purpose of critical analysis of the topic, ESTIA Healthcare has been chosen where the core
business of the company is to provide shelter and other services to the senior citizens of
Australia. However according to the undertaken case the investors are facing a tough time as
the investment in the company has been huge but the relative returns are negligible. The
problem has been viewed in the paper by two approaches, The Utilitarian Perspective and the
Kantian Perspective where the coinciding interest of the stakeholders have been analyzed.

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Table of Contents
Introduction................................................................................................................................3
Company Background............................................................................................................4
Discussion..................................................................................................................................5
Utilitarian perspective:...............................................................................................................6
Kantian Approach..................................................................................................................7
Conclusion..............................................................................................................................8
REFERENCES.......................................................................................................................9

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Introduction
This report will firstly establish the relationship between corporate governance and
corporate performance of an organization. The paper will conduct critical analysis, take a real
life example of an organization, and state the problems in corporate governance and ethics of
such a company. Further, the failures in the corporate governance and ethics shall be stated.
The perspective of the problems and its analysis will be stated from a Utilitarian as well as
Kantian approach.
Corporate Governance maybe defined as the accumulated set of regulations and
practices that are religiously followed by an organization. These sets of rules acts as a
guideline and are highly responsible in dictating the company’s decisions. The relationship
between corporate governance and corporate performance cannot be said that it is directly
proportional. Sometimes it acts as a path to incur more profits for the company but sometimes
due to its ethical background may stand in the way to earn more profits for the company and
acts against the interest of the stakeholders. Areas highly effected are as follows:
i) Stock Performance: One of the primary measures to assess the current position
financial and operational position of a company is by analyzing the stock
performance of the company on the market. Earlier it was said that the corporate
governance of a firm is directly linked with the performance of the company and
therefore on the stock prices, it cannot be said evidently that the share price is
highly dependent on the share prices but is partially evident in the long run
performance in the stock market (Weber & Wasieleski, 2013)
ii) Environmental Performance: Environment is a crucial factor that decides the
longevity of an organization in the end. The government and the people are
becoming highly aware towards the current conditions of the environment, so it is

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the role of the corporate governance to employ ethics through mandating CSR
activities towards the environment.
iii) Management Turnover: In this case, leadership is highly correlated with the
performance of the management. Changes in the style of leadership for a fixed
period for many times may result in downgrading the overall performance of the
organization. Strong Corporate governance acts as a backbone for the company,
affixes the leadership style and quality of the top management, and is highly
responsible for the long-term performance of the organization. Poorly performing
companies have weak corporate governance and because of which the leaders are
frequently changed.
iv) Accounting: Another important aspect of an organization that is highly correlated
with the performance of the management is the accounting part of the company.
The accounting part is the trickiest part as hiding losses and showing more profits
inflate the share price of the company in the market, so effective rules and
regulations provided by the corporate governance of the company acts as an
ethical pillar and bars the company from applying tricky and unethical tactics to
fool the people (Crane et al., 2019).
Importance of Old Age Homes
Old age homes are specialized organizations that provide help to the senior citizens by
providing them the basic shelter, food and clothing. Moreover, added services also become
essential such as hospitality of the concerned people. Old people or rather the senior citizens
who are there at the last or the pre last stage of life is prone to more diseases and vulnerable
to the climatic changes. Therefore, the probability of getting affected by diseases are more
compared to the people who are aged less. The stated requirements were more focused on the
basic physical needs. On a psychological note, the real need of old age homes comes into

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focus when people after a certain age feel neglected by their children and close ones when
they require others the most. In some cases, it can be seen that many old people have been
single and have no family. The emotional animal within such people constantly searches for
affiliation and a window to reduce depression. On the other hand, some old people are highly
dependent on the emotional need and constantly need the attention of other people to feel
good. Here, old age homes provide the perfect facility by providing an environment by
fulfilling the basic physical facilities on one hand and fulfils the emotional requirement due to
the presence of same aged and likeminded people on the other hand. These facilities provide
the people both security and satisfaction and make them realize that they are also an integral
part of the society. Importance of Old Age Homes in the society are as follows:
a) Independence: One primary problem that develops with age is sense of dependence.
However, it is true that after a certain age the human body starts to break down slowly
but the emotional breakdown fastens the whole process. Old Age homes plays an
essential role in instilling the emotional strength in the minds of the people and help
them to lead a healthy life.
b) Company: It is evident that after a certain age people starts to feel lonelier and the
level of passion increases towards their life rather than their career. This is the time
when people starts to feel the need of company and a person with whom he or she can
share their feelings, their problems having the same type of interest.
c) Requirement of Medical and Financial Assistance: At this point of time, as mentioned
earlier, the requirement of level of self-dependence decreases and like the children,
old aged people start depending more on other people due to the increased level of
medical and financial requirements. The packages of the old age home are structured
in such a way that they provide coverage of both medicine, hospitality requirements
and financial coverage.

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Company Background
Estia Health is an organization for the aged, where they provide a chain of quality old
age home services across various parts of Australia. It is operating its business in
Australia for more than 50 years now. The purpose of the company is to operate the
business like a family where every customer is a member of the family. Using Innovation
and advancement in technology, it has constantly transformed the ways of the company
and tried to improve the lives of the people under the shade of the organization (Estia
Health, 2019). Though it cannot be said that the company is a nonprofit making
organization but the ethical background of the company and the nature of the business of
the company is highly inclined to provide social benefit to the old people of the country.
Therefore, if more concentration is given on the profit making aspect then either the
quality of the services will deteriorate or the price of the service will rise which shall
result in decrease in the footfalls of the company and less old aged people could be served
(Australian Financial Review, 2019).
Therefore, the main issue can easily be identified that the interest of the stakeholders
of the company and the ethics of the company are coinciding with each other. Let us view
the perspective of the operations of the company from the Utilitarian perspective and the
Kantian Perspective.
Discussion
Utilitarianism is a philosophy where the moral ethics and what is right and what is
wrong is highly dependent on the results. If the outcome results in a loss then the ethics are
not positive (Mill, 2016).The theory is static and simple in nature as it is based on a single
principle. The elements of the approach are:
a) What is good and what is bad? :

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b) Whose interest is to be considered when the output is to be maximized?
c) Whether the considered actions, rules and policies resulted in the right consequences
or will result in the right consequences
The second perspective of viewing this issue is the Kantian Perspective where the
motive and idea is highly inclined towards what is the right thing to do rather than
what shall be the result or the outcome of the situation. Unlike the Utilitarian
perspective, Kantian perspective is a more accurate fit for the concerned organization.
This is because the core business of the company is to take care of the old people who
are a major stakeholder of the company.
Utilitarian perspective:
Utilitarian perspective, which is an ethical concept, s determines right from wrong by
concentrating on the results (Conway & Gawronski, 2013). According to this theory, most of
the ethical choice is the one, which produces the maximum good for the maximum number.
This approach is the commonly used approach, which is used in a business organization to
evaluate the way business organization, generate costs and benefits. Utilitarianism approach
is the method to decide the morally correct action for a specific situation. Through this
approach, the actions, which can be performed, are identified. The benefits and loss of every
possible action are evaluated through this approach. This approach will help to identify the
most ethical action, which will generate the maximum benefit and evaluate the cost for the
benefit. Bentham’s principle of utility is crucial for this approach. According to Bentham,
choosing the policy, which will deliver the maximum benefits for the society and evaluate the
harm for the action (Boutilier et al., 2015). The greatest good for the greatest number is the
motto of him. Jon Stuart Mill provided another important aspect wherein he explained the
utilitarian approach from a different perspective. According to him, benefits and losses will

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be calculated not only in terms of pleasure and pain but also in terms quality of the pleasure
and pain (Gray, 2013).
As an organization, Estia Health delivers a chain of quality old age home services in
Australia. The stakeholder of this organization is not happy with the action of Estia Health.
This organization is unable to generate profits. The principle of corporate governance and
ethics of this organization has failed. This organization has to evaluate the action of this
organization. Through the utilitarian approach, the action of this organization will be
evaluated. This organization is focused to deliver care for the old age person in Australia.
This organization has to evaluate its action through the utilitarian approach, which will help
the organization to identify the ethical action, which will generate the greatest profit for the
maximum people. Evaluating the action of this organization will recognize several options
for the organization (Barrow, 2015). However, the organization will adopt the action, which
will beneficial for the organization and promote the maximum benefit for the maximum
people. It will help the organization to improve corporate governance and corporate
performance. This approach will help the organization generate profit through the most
ethical action, which will generate profit. The cost of the organization has to pay for the profit
will be evaluated through this approach. Stakeholder of this organization will be happy by
getting the best services from this organization, as this organization will focus to promote the
greatest profit for the maximum number of people.
Kantian Approach
No matter how small or big an organization is it is important to abide by the ethical practice
of business performance as every business entity is recognized as a corporate law abiding
body operating and influencing a society. Therefore Estia Health being an old age home,
offering valuable service to the less fortunate population takes a Kantian approach in
analyzing how the corporate governance strategy of Estia Health could imply Kantian

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approach that would specifically highlight on promoting social welfare irrespective of the
amount of negativity spread about the firm. Kantian concept of social responsibility argues
that it is a prime duty of business organizations to promote general happiness. The Kantian
approach largely emphasizes on incorporating a humanitarian approach towards business
(Dierksmeier, 2013). Estia Heath in its present dilemma needs to strike a proper balance
between its profit generation and fulfillment of social goals in order to help Estia Health gain
back its organizational position. It is genuinely not against Kantian ethics to expect firms to
look after their benefits and revenue generation techniques however, it is to strike the right
balance between service and revenue generation. A dutiful behavior in business demands a
responsible use of business resources and using them purely for non-business purposes may
not be in a true spirit of duty.
Estia Health needs to apply a strategic approach in maintaining its internal staffs with
the external ambience of the market to remain relevant in its business operations. However, in
real business conditions it is often realized that the Kantian approach or moral code is not
realistic rather provides a theoretical structure of operation, which might be ineffective in real
life condition (Jones, 2017). Therefore, Estia Health needs to imbibe practical as well as
theoretical approach in its corporate governance strategy to help the firm build its corporate
image in the society.
Conclusion
From the above study it can be inferred that both the perspectives are right in their
own way and as the company’s core business is serving the people, the investors are not
satisfied with the returns of the company. However, through the Kantian Approach and the
Utilitarian Approach, the problem can be viewed in a reflective way and solution to the

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problem is by differentiation based on the per capita income of the people. From the
Utilitarian approach, the problem is a huge point of concern as the interest of the stakeholders
are not met accordingly as they are not receiving profits. On the other hand, if the problem is
viewed from the Kantian perspective the process has to continue, as serving the society
should be kept as the top priority.

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REFERENCES
Australian Financial Review. (2019). Estia Health faces threat of class action. Retrieved 18
October 2019, from https://www.afr.com/property/estia-health-faces-threat-of-class-action-
20180208-h0vqz1
Baron, M. W. (2018). Kantian ethics almost without apology. Cornell University Press.
Barrow, R. (2015). Utilitarianism: A contemporary statement. Routledge.
Boutilier, C., Caragiannis, I., Haber, S., Lu, T., Procaccia, A. D., & Sheffet, O. (2015).
Optimal social choice functions: A utilitarian view. Artificial Intelligence, 227, 190-213.
Conway, P., & Gawronski, B. (2013). Deontological and utilitarian inclinations in moral
decision making: a process dissociation approach. Journal of personality and social
psychology, 104(2), 216.
Crane, A., Matten, D., Glozer, S., & Spence, L. (2019). Business ethics: Managing corporate
citizenship and sustainability in the age of globalization. Oxford University Press.
Dierksmeier, C. (2013). Kant on virtue. Journal of Business Ethics, 113(4), 597-609.
Estia Health. (2019). Estia Health Aged Care: Australian Aged Care | Aged Care Facilities |
Residential Aged Care Facilities | Nursing Homes. Retrieved 18 October 2019, from
https://www.estiahealth.com.au/
Gray, J. (2013). Mill on liberty: a defence. Routledge.
Jones, S. (2017). Penalty rates not safe in aged care. Lamp, The, 74(4), 12.
Mill, J. S. (2016). Utilitarianism. In Seven masterpieces of philosophy (pp. 337-383).
Routledge.

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Weber, J., & Wasieleski, D. M. (2013). Corporate ethics and compliance programs: A report,
analysis and critique. Journal of business ethics, 112(4), 609-626.