Corporate Governance and Leadership: Analysis and Recommendations

This report analyzes the role of corporate governance and leadership in organizations, with recommendations for CEOs to improve their behavioral patterns, leadership styles, and employee engagement. The report also highlights the importance of organizational culture, climate, and change management.

Running head: CORPORATE GOVERNANCE AND LEADERSHIP
Corporate governance and leadership
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1CORPORATE GOVERNANCE AND LEADERSHIP
Executive summary
The aim of this report is to study the case study titled, “Corporate Governance and Leadership:
First international forum. Paris. White paper” and analyze the role of corporate governance and
leadership in organizations. In any organization, the chief executive officer holds supreme
authority. He is the head of the organization and is thus responsible for taking all major decisions
that affect the business operations. Accordingly, he is also liable and accountable for the
consequences of such actions. He is also responsible for ensuring maximum employee
engagement and loyalty, through a variety of practices which have been discussed below.
Moreover, good corporate governance practices, implying good behavioral patterns in CEOs,
have also been highlighted. The concept of leadership and appropriate leadership styles for CEOs
have also been examined.

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Table of Contents
Introduction:....................................................................................................................................3
Discussion:.......................................................................................................................................4
Behavioral patterns of CEOs.......................................................................................................4
Leadership and management style of CEOs................................................................................6
CEO and his relationship with the employees.............................................................................8
Conclusion:....................................................................................................................................10
References:....................................................................................................................................11

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Introduction:
Corporate governance may be defined as the system comprising rules and regulations and
operational processes which direct and control a firm. The main role of corporate governance is
to ensure that the interests of the organization’s stakeholders are balanced and taken care of
(Stout & Blair, 2017). It is a well known fact that every organization would have its own set of
business objectives and long term and short term goals which must be attained in due course of
time. Effective corporate governance within an organization wouled help it achieve its objectives
and goals (Claessens & Yurtoglu, 2013). As a matter of fact, corporate governance involves
every minute aspect of organizational management, which would include internal controls,
action plans and also measurements of firm performance. In the case study titled, “Corporate
Governance and Leadership : First international forum. Paris. White paper”, the author discusses
about the role of governance and its relationship with leadership. Corporate governance refers to
the structure of an organization and the means through which its processes are carried out. As
such, the leaders of an organization would be entrusted with the role of direction and
management of the same and would be held accountable for all results and corporate
performance (Charlety, 2013). In the following sections, the role of the CEO within an
organization, along with other aspects of corporate governance, will be evaluated based on the
case study.

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Discussion:
Behavioral patterns of CEOs
It must be asserted that corporate governance in an organization is directly related to the
people or the human resources. In the past few years, all standards and regulations that have been
included as part of governance have to do with the human resources of an organization.
Moreover, it has been deduced that the top management at a firm, comprising the board of
directors would be responsible for the actions (positive and negative) of the organization. In
other words, the corporate leaders (the Chief Executive Officer) would be held accountable. For
instance, two CEOs went down in history with regards to bad behavior that reflected poorly on
their companies. Bernie Ebbers of Wolrdcom and Kenneth Lay of Enron were synonymous with
the scandals that ripped their companies of billions of shareholder money. Similarly, in 2010, an
explosion of an oil rig in the Gulf of Mexico led to the death of eleven people and caused
widespread destruction and devastation. The CEO of the company, Tony Hayward, handled the
disaster in a proper manner in the beginning. He turned up at the scene of the disaster and
seemed to empathize with the miserable condition there. However, in due course of time, he
began to deflect blame and shirked all responsibility. This was an error on the CEO’s part
(Charlety, 2013). However, the question arises if it is wise to hold one individual responsible for
all events at an organization (Reina, Zhang & Peterson, 2014). However, as the chairman of
ACCOR, Gilles Pelisson admitted, a CEO must accept responsibility. Accordingly, some
recommendations have been presented for the Board of Directors at a firm, so as to bring out
good behavior from CEOs.
 One of the most important aspects of effective leadership is the ability to pick up
and learn from past experiences. It must be understood that CEOs too are human

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beings and therefore vulnerable to errors. However, the need of the hour is to recognize
these mistakes and take necessary action to reduce collateral damage caused by these
mistakes. Tony Hayward may have made a mistake, but he could have recuperated from
it by taking proactive measures. It might so happen that a CEO falls short of efficient
crisis management. However, he should be able to learn from his mistakes and implement
the lessons into his future endeavors.
 The board of directors should focus on the communication skills of the CEO. This is one
of the most crucial aspects of corporate governance and leadership. A CEO should be
able to effectively communicate with his subordinates and convey his viewpoint clearly
to them (Men, 2014). In case of crisis or emergency, as in the case study, effective
communication skills on part of the CEO can go a long way in reassuring the concerned
stakeholders and shareholders. As such, transparency is also one of the most sought after
attributes in a CEO. Ambiguity in communication can lead to confusion, chaos and
conflicts. Additionally, a CEO should be a good listener (Tourish, 2014). For instance, in
the case study, if the CEOs had managed to lend an ear to the people concerned and had
actually taken their viewpoint into account, such scandals could have been avoided.
 CEOs should be adept in the art of managing people. This is closely related to the kind
of leadership style he follows. A transformational or situational approach to
leadership should be encouraged (Braun et al., 2013). The CEO must remember that
although he is the leader of the organization, he cannot exert supremacy or autonomy in
the organization. This is all the more poignant in case of risks and crisis. The CEO should
be flexible and adapt his leadership and management style based on the situation.

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 As a CEO, one can expect unforeseen situations and risks which may come
unannounced. In such cases, the CEO should be able to act on instinct and intuition (Tao
& Hutchinson, 2013). However, his approach should be ethical and reflect favorably on
the organization he represents.
Leadership and management style of CEOs
Based on a careful reading of the case study, it can be said that the Chief Executive
Officer is undoubtedly one of the most important aspects of corporate governance at a firm. He
holds the firm together, and without effective leadership, the organization (and all that it entails)
would fall apart. In corporate governance, the leadership style and the behavioral patterns of the
CEO is of vital importance (Carmeli & Paulus, 2015). The case study claims that the CEO of an
organization is the supreme authority, the decision maker whose perspective must be upheld by
all members of the organization and all organizations. As shown in the case study, most CEOs
tend to follow a bureaucratic or authoritative leadership style. Such a leadership style is
based on normative rules. All the subordinates or followers of the CEO are expected to adhere to
his line of style and follow his orders without questioning him. In such cases, the CEO has a
stringent set of rules and regulations and business is conducted in the workplace according to
such regimes. Since the rules of corporate governance place the power in the hands of the CEO,
he feels it is his innate right to exert his positional power on those below him in the
organizational hierarchy. In other words, the subordinates or the other employees of the office
are expected to follow him by sheer force of authority.
However, it must be established that a CEO is the organizational leader and thus lead by
means of example. Since he is the leader of the organization, his subordinates would follow his
course of action and learn from them. Therefore, instead of a bureaucratic style of leadership, a

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transformational leadership or a situational leadership style may be followed (Van der Voet,
2014). According to the transformational leadership theory, the leader (the CEO, in this case)
would be expected to work in accordance with his team and encourage the active participation of
all team members. He would be responsible for creating a vision for the company and guide the
other employees on this direction. He is supposed to be a visionary, a risk taker, an inspirational
figure that the employees can look up to. Most importantly, in such a leadership practice, the
CEO does not exert his superiority on his subordinates. He is a leader in the true sense of the
term. He invites the participation and engagement of all team members and encourages them to
voice their opinions and viewpoints. A situational leadership theory may also be adopted.
According to this theory, the leader should be versatile and flexible and have the ability to adapt
to changes or unforeseen situations (McCleskey, 2014). As the Chief Executive Officer, one may
have to deal with a number of unpredictable situations. He would have to deal with media
scrutiny as well (Liu & McConnell, 2013). In all these situations, a generalized theory of
leadership would not suffice. He would have to adapt his leadership and managerial style
according to the specifics of the situation itself. By setting an example for the rest of the
organization, the CEO is expected to ensure that the firm is abiding to strategies that would cater
to its long term success. He is also supposed to implemented management information systems
and internal controls and take up effective risk management systems. It was a lack of proper risk
and crisis management systems which led to the downfall of CEOs in the case study. In short, by
exhibiting a transformational or situational leadership style, the CEO would act as the link of
intermediary between the organization and the board, thus paving the way for strong corporate
governance.

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CEO and his relationship with the employees
As mentioned in the case study, the role of corporate governance within an organization
is closely related to the human resources of the workforce employed by the company. While
there is no doubt about the fact that the CEO is the supreme authority in the organization, it must
also be admitted that the employees form the chief assets at any organization. In the section
above, the report discusses the role of leadership in ensuring that a CEO would be able to guide
and direct his subordinates. It has also been found that a CEO plays a crucial role in
determining employee engagement. The relationship that a CEO shares with his employees
would determine how the latter feel about their job. In the highly competitive business sector
today, CEOs need to come up with ways of acquiring the loyalty of the employees (Luo, Kanuri
& Andrews, 2014). Equipped with their loyalty, the CEO would be able to effectively carry out
his duties and responsibilities. Without the backing or the support of the employees, the CEO
would be unable to meet the requirements of the business. Similarly, in cases of crisis, the CEO
would be unable to manage the risks and implement management strategies without the help of
the employees. Employees who are loyal to their CEO and their company are twice as likely to
pull in their weight and improve the overall performance of the organization. There are some
measures that a CEO may take to increase the loyalty and employee engagement quotient at his
firm. They are as follows:
 Organizational culture – This concept refers to the working environment within the
organization which consists of all the employees and the various professional and
personal relationships that are formed in the workplace (Azanza, Moriano & Molero,
2013). It is the responsibility of the CEO to ensure that a favorable corporate culture
persists in the workplace, so as to promote high levels of employee engagement and

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productivity. One way of doing so would be by improving communication skills. The
CEO should be accessible and should maintain open lines of communication with the
employees. He should also be a good listener and take into consideration the viewpoints
and opinions of the employees.
 Organizational climate and community – Organizational climate or corporate climate is
closely associated with the field of organizational or corporate behavior. The climate of
an organization would have an impact on the way employees behave in the workplace
and also shape their attitudes and performance (Schneider, Ehrhart & Macey, 2013). It
would also determine employee satisfaction rates. Since the CEO is the head of the
organization, he is responsible for enhancing the organizational climate, by
communication and strategic management of human resources.
 Organizational change – Change is the only constant in an organization. In a dynamic
working environment, a CEO would have to implement strategic or managerial changes
from time to time. As expected, such changes are usually met with resistance. As such, it
is the responsibility of the CEO to convince the employees and guide them through the
change management process (Carter et al., 2013). This is where a CEO’s situational
leadership style would be most effective.
 Teamwork – Although a CEO is the head of the organization, he must recognize that he
cannot function in isolation. He would require the support and help of his subordinates to
make progress. In other words, an organization is based on the concept of teamwork. A
CEO should be willing to incorporate the ideas and opinions of his team members and
give them due importance instead of dismissing them as inferior. The CEO should also

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invite active participation from all employees, so that the organization can progress
together as a group.
 Diversity and flexibility – The CEO should be flexible enough to accommodate changes
if required. He should also be willing to adapt his leadership and management style based
on the unique situation. He should also promote an environment of diversity and
inclusiveness in the workplace.
Conclusion:
To conclude, it can be said that the role of the CEO is of supreme importance in the
workplace. The case study highlights certain examples of bad behaviors or poor management
styles on part of the CEOs, which could lead to the decline of the organization as a whole.
However, certain recommendations have been made for the corporate governors, to incite good
behavior from the CEOs. The report also studies the role and responsibilities of the CEO, with
emphasis on the leadership practices that would be most suited to the role. It must also be
admitted that no CEO can make progress without the support of loyal employees. Promoting a
favorable organizational culture and climate, which supports inclusion and diversity, coupled
with effective change management and leadership styles, would help a CEO attain the goals and
objectives of his organization.

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