Management : Analyse the Effect of Corporate Governance Theories

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2020
Management
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Contents
Introduction...........................................................................................................................................3
Ethical issues.........................................................................................................................................3
Implication of ethical issues on corporate sustainability........................................................................4
Conclusion.............................................................................................................................................6
References.............................................................................................................................................8

Introduction
The report demonstrates critical understanding of ethical perspectives with an aim to achieve
goals. The report comes up to analyse the effect of corporate governance theories, it is seen
that complying with corporate governance leads to strengthen the brand image of company. It
is the procedure through which organisations are operated and controlled encompasses on
external and internal factors, which affect interest of organisation`s stakeholders such as
government regulators, customers, shareholders, and suppliers (Balvanera et al., 2017).
The report considers practical implications of unethical examples based on corporate
governance and corporate reputation with the help of examples of corporates. With the
increasing competition in the global market, it is seen that sustainability has been most
ignored consideration for the companies but gradually government has imposed its
importance for all the organisations, which has mandate them to accomplish CSR strategies
and report environment law compliance (Horr et al., 2016).
Ethical issues
The role of corporate sustainability will be directed where there are the responsibilities of
board, which includes settings of organisation`s strategic objectives, availing leadership into
effect, supervision of management and then reporting to the shareholders on stewardship
(Bjelica et al., 2016).
To ensure corporate governance and sustainability, any company has to meet eight features
such as accountable, effective, efficient, equitable, responsive, transparent, and inclusive of
rule of law. Highest level of confidence that is associated with organisation that is known to
have good corporate sustainability and governance (Bjelica et al., 2016). Poor corporate

governance gives invitation to ethical issues. This leads to spoilage of workplace, which is
the culture of the company (Miller, & Wyborn, 2018).
Ethical issues can be related to inequality at workplace, lack of environmental sustainability,
racial, and sexual harassment. Companies often are not able to comply with the code of ethics
and conduct where corporate values are spoiled. It is important to know that there is a greater
link between corporate sustainability and corporate image (Clarke, & Boersma, 2017).
Implication of ethical issues on corporate sustainability
The company is committed to understand environment and then mitigate the effect on
operations from beginning to final stage of operational life. As the companies were not aware
of adverse impact and do not take care of mitigation of risks for the local communities
(Clarke, & Boersma, 2017). For this, the company can implement strict standards, which can
go beyond local and global regulations. Here are some corporate examples given as FIFA
scandal is one of the most popular disrespecting the code of conduct, where leaders,
chairman, and CEO has received bribes from country so that they can get chance sooner to
conduct their matches (Hove, & Paek, 2017). This is absolutely against the code of conduct,
which has spoiled that corporate image as well as culture of company. Corruption spoils the
code of conduct amongst the employees and delegate them wrong teaching. Another
example- Enron has been facing scandals in terms of not fulfilling to compensate their losses,
which sought excess at expense of communities and employees. This unethical practise has
affected shareholders and pensioners, who have lost it. This creates a sense of non- trustable
company losing the customer base of the organisation (Liu et al., 2018).
Unethical practises, which includes opting to clean drinking water, participation in child
labour, exploitation of uneducated people in several nations, which makes it amongst most
corrupted companies. Another example of misusing tweeter with a means of transferring

information by Elon Musk for Tesla, it is seen that it is quite unethical to decide personally to
buy back the equity shares (Miller, & Wyborn, 2018). Elon Musk has informed in a night that
it wants to make Tesla as private company and it decides to buyback the equity shares. This
indicates that company does not announce any appropriate procedure and does not feel
important to conduct annual meetings with an aim to solve and decide to take back the
ownership (Nowotny et al., 2018).
The company has to comply with CSR (corporate social responsibilities) strategies according
to the government regulations. The government has made CSR strategies as a compulsion for
MNCs so that they can contribute towards society. To accomplish commitments towards
society and create transparency both in the eyes of customers as well as governments, the
company has to prepare a sustainability report. Other example of non-compliances of
sustainability concepts especially lack of awareness in environmental concerns (Rosoff et al.,
2018a).
One of the most suitable companies for lack of environment concerns is “BHP Billiton”,
which shows that due to excessive generation of air pollution engaged in company`s
operations, and engagement of child labour in mining has created its image more unethical
(Rosoff et al., 2018a). Same as BHP Billiton, Rio Tinto is another organisation who suffers
from social and economic disparities. It is seen that 40 workers have been killed due to Rio
Tinto operations in 2013. Rio Tinto incurs huge losses on investment, which provoke costly
labour disputes. Blind pursuit of profits has caused disputes with several unions, which
includes community, environmental, and indigenous groups. Although, the company`s
reporting is in line with GRI reporting and guidelines, it does not mean that organisation
operate in an ethical way (Rosoff et al., 2018b).

Rio Tinto claims that it can maintain higher standard of accountability and responsibility,
which act responsible for the success of the organisation. For the Rio Tinto sustainability,
there are criteria to judge Australian company for their sustainability, which includes
maintaining labour standards, environmental impact, supply chain, community investment,
and sustainability engagement. The major area of omissions in the reporting concerns is
“human rights” where child labour is the major people suffering from lack of education, and
continuous deaths due to heavy operations in mines. The organisations such as Rio Tinto and
BHP Billiton need to take the social licence of operating in an ethical way and maximise the
profits of the company (Rosoff et al., 2018b). On the other hand, it has to underpin social
investment, which can support the programs aiming to enhance the quality of life contributing
towards direct business activities, longstanding commitment in investing less than a percent
for our pre-profit. With the help of social frameworks, the company must aim to contribute to
combat in addressing the sustainable development relating it to business. The approach will
lead to such as education equity, environmental resilience, and natural resource governance
(Balvanera et al., 2017).
Through social inclusion and human capabilities, the companies has to ensure that their
employees have enhanced lives, health, wellbeing., education, and training in consideration to
mining so that it can boost sustainable development goals such as no poverty, zero hunger,
good health, enhanced marine life, pollution free air, sanitation and clean water, affordable,
clean energy, economic growth, reduced inequalities, climate actions, and partnership for
goals (Hove, & Paek, 2017). In order to work towards the combating of the global issues, it is
seen that the company comes up with several global signature programs to address global
sustainability challenges, country programs to address the national sustainability issues, and
BHP investment for the local projects and BHP funding and managing to support the
priorities of BHP communities. Natural resource and its governance can create transparency,

which is essential to ensure that it can improve the wealth and living standard of millions
people in the world (Holmstedt, Brandt, & Robèrt, 2017).
Conclusion
From the above discussion, it is seen that CSR strategies come up with commitment to create
transparency and create positive image of the company. Presence of active group of the
independent directors and executive directors, it can contribute great deal in ensuring
confidence in market. CSR is the practise of integrating environmental and social objectives
in business conduction. The common role of CSR is to help and control costs, attracting top
level talent, attract, induce company`s brand and then finally facilitate long term success of
the organisation. The essay has elaborated the examples of several companies who suffer
from different type of unethical practises such as BHP Billiton and Rio Tinto suffering from
environment sustainability. Nestle is not able to maintain its workplace in an ethical way,
which states that child labour and lack of equality at workplace.

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