Corporate Strategy and Governance
Added on 2023-01-12
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CORPORATE STRATEGY
AND GOVERNANCE
AND GOVERNANCE
Abstract
This study will show the main concept of corporate governance and issues associated with it. The
major issue as well as problem which organization has faced from past few years is financial
statement transparency.NMC healthcare faced the corporate governance failure where the great
issue was reported in the accounting system. In the following year, the 4 senior executives were
being suspended for the improper disclosure of the financial statements. Further, it will also
show importance of implementing corporate governance system in healthcare as it allows
managers in managing risk and performance as well.
This study will show the main concept of corporate governance and issues associated with it. The
major issue as well as problem which organization has faced from past few years is financial
statement transparency.NMC healthcare faced the corporate governance failure where the great
issue was reported in the accounting system. In the following year, the 4 senior executives were
being suspended for the improper disclosure of the financial statements. Further, it will also
show importance of implementing corporate governance system in healthcare as it allows
managers in managing risk and performance as well.
Table of Contents
Abstract............................................................................................................................................2
Table of Contents.............................................................................................................................3
INTRODUCTION...........................................................................................................................4
Chapter 2: Literature Review...........................................................................................................5
Concept of corporate governance................................................................................................5
Role of corporate governance within organizations....................................................................6
Importance of financial statement transparency in corporate governance..................................9
Conclusion.................................................................................................................................11
Gantt Chart.................................................................................................................................11
CHAPTER 3..................................................................................................................................12
Research Methodology..............................................................................................................12
CHAPTER 4: Findings and Analysis............................................................................................14
CONCLUSION..............................................................................................................................34
CHAPTER 5 RECOMMENDATIONS & ACTION PLAN.........................................................34
REFERENCES....................................................................................................................................30
Abstract............................................................................................................................................2
Table of Contents.............................................................................................................................3
INTRODUCTION...........................................................................................................................4
Chapter 2: Literature Review...........................................................................................................5
Concept of corporate governance................................................................................................5
Role of corporate governance within organizations....................................................................6
Importance of financial statement transparency in corporate governance..................................9
Conclusion.................................................................................................................................11
Gantt Chart.................................................................................................................................11
CHAPTER 3..................................................................................................................................12
Research Methodology..............................................................................................................12
CHAPTER 4: Findings and Analysis............................................................................................14
CONCLUSION..............................................................................................................................34
CHAPTER 5 RECOMMENDATIONS & ACTION PLAN.........................................................34
REFERENCES....................................................................................................................................30
INTRODUCTION
Corporate governance is basically the well-through system of practices, rules as well as
processes that directs the organizations and thus controls them. The problem of corporate
governance has become one of the major concern across all the organizations and thus have
affected their functioning. It is generally the way in which an organization is controlled and
governed. In short, corporate governance is mainly the mixture of various laws and rules through
which businesses and their organizations are regulated.
NMC healthcare is one of the leading and well-known healthcare chain and distribution business
which was established by 1974 by B.R.Shetty and headquartered in Abu Dhabi, United Arab
Emirates(Adiputra, Siregar and Wardhani, 2017). This is the second largesthealthcare
organization which has market share of around 17.5% and thus have a great profit ratio. The
issue of corporate governance has always been the major problem in NMC healthcare which has
affected its overall operation and market position. In December 2019, NMC healthcare shocked
the market by the announcement which acknowledges their profits for last six months were $153
million lower than the company announced months earlier. This has been one of the massive
failures of overall auditing process at this company. This eventually affected the market position
of NMC healthcare to a high extent and in addition, also impacted their stakeholders. Actually
the suspension of 4 senior executive directors of NMC healthcare was majorly followed by
scandal of overstating profits of company by around $153mand later on revealed that company
experienced profit of nearly $322m. The main purpose for overstating the profits within
foretasted profit was to entice the shareholders as well as increase the investment as well as
funds to retailer. Due to this failure of the corporate governance as well as miscommunication
issues, a large number of people within company were being suspended who were engaged
within this accounting fraud. The stakeholders blamed the company and said that NMC
healthcare should have a tight policy as well as procedures that ensure their accounting is
appropriate and correct. Despite the company’s external auditors who are responsible for
checking that everything is in line and correct, NMC healthcare faced a huge brunt in its
corporate governance that eventually led to the decline of their position in market.
1.1 Background of the Study
Corporate governance is basically the well-through system of practices, rules as well as
processes that directs the organizations and thus controls them. The problem of corporate
governance has become one of the major concern across all the organizations and thus have
affected their functioning. It is generally the way in which an organization is controlled and
governed. In short, corporate governance is mainly the mixture of various laws and rules through
which businesses and their organizations are regulated.
NMC healthcare is one of the leading and well-known healthcare chain and distribution business
which was established by 1974 by B.R.Shetty and headquartered in Abu Dhabi, United Arab
Emirates(Adiputra, Siregar and Wardhani, 2017). This is the second largesthealthcare
organization which has market share of around 17.5% and thus have a great profit ratio. The
issue of corporate governance has always been the major problem in NMC healthcare which has
affected its overall operation and market position. In December 2019, NMC healthcare shocked
the market by the announcement which acknowledges their profits for last six months were $153
million lower than the company announced months earlier. This has been one of the massive
failures of overall auditing process at this company. This eventually affected the market position
of NMC healthcare to a high extent and in addition, also impacted their stakeholders. Actually
the suspension of 4 senior executive directors of NMC healthcare was majorly followed by
scandal of overstating profits of company by around $153mand later on revealed that company
experienced profit of nearly $322m. The main purpose for overstating the profits within
foretasted profit was to entice the shareholders as well as increase the investment as well as
funds to retailer. Due to this failure of the corporate governance as well as miscommunication
issues, a large number of people within company were being suspended who were engaged
within this accounting fraud. The stakeholders blamed the company and said that NMC
healthcare should have a tight policy as well as procedures that ensure their accounting is
appropriate and correct. Despite the company’s external auditors who are responsible for
checking that everything is in line and correct, NMC healthcare faced a huge brunt in its
corporate governance that eventually led to the decline of their position in market.
1.1 Background of the Study
Transparency in financial statement means statements which are user friendly and clear,
everything in such statements are properly disclosed and includes facts which can be easily
understood (Ghoorah and et.al., 2018). The objective of the financial statement is that it should
be interesting and easily understood for the people who are not having any specific knowledge of
accounting and financial terms. Auditing and cross checking ensures that financial statements are
free of any error and fraud. Transparency in financial statement also includes that all the figures
in the statement are clearly recorded (Gassen and Muhn, 2018). Fraud in financial statement
includes that financial statements are willingly presented with wrong figures and data. Financial
frauds are illegal and unethical because they are not able to present correct information. This
study will discuss transparency in financial statement because of increasing cases of fraud in
financial statement (AL-Massoodi and Dawood, 2019). Contribution that corporate governance
can make in transparency of financial statement and for corporate governance importance of
financial statement will be discussed in the study.
1.2 Problem Statement
The major issue as well as problem which organization has faced from past few years is financial
statement transparency. The corporate governance relates to carrying out the activities of
business according to the desire and needs of stakeholders. It is usually all about balancing the
individual as well as societal goals and economic goals. NMC healthcare PLC is basically known
for the great corporate governance as their core framework and also the company is primarily
known for safety as well as ethics towards environment along with people.
This great failure of the corporate governance in NMC health care resulted in great decline in
their market share to around 11.4% and thus affected their overall stakeholders. Due to this
misapprehension, the confidence and trust of their customer ultimately declined in the company
and in the following year, sale and profit ratio of the company reduced to more than 45% and
this impacted their market position(Filatotchev, Poulsen and Bell, 2019). Along with this, NMC
healthcare also lost their most of the shareholders after this case and the company was later on
alleged to pay a handsome fine of around $613m towards end of year. Along with this, more than
12 investors filed accounting fraud upon NMC healthcare PLC as well as claimed that company
had been misleading them and lying for gaining funds.
everything in such statements are properly disclosed and includes facts which can be easily
understood (Ghoorah and et.al., 2018). The objective of the financial statement is that it should
be interesting and easily understood for the people who are not having any specific knowledge of
accounting and financial terms. Auditing and cross checking ensures that financial statements are
free of any error and fraud. Transparency in financial statement also includes that all the figures
in the statement are clearly recorded (Gassen and Muhn, 2018). Fraud in financial statement
includes that financial statements are willingly presented with wrong figures and data. Financial
frauds are illegal and unethical because they are not able to present correct information. This
study will discuss transparency in financial statement because of increasing cases of fraud in
financial statement (AL-Massoodi and Dawood, 2019). Contribution that corporate governance
can make in transparency of financial statement and for corporate governance importance of
financial statement will be discussed in the study.
1.2 Problem Statement
The major issue as well as problem which organization has faced from past few years is financial
statement transparency. The corporate governance relates to carrying out the activities of
business according to the desire and needs of stakeholders. It is usually all about balancing the
individual as well as societal goals and economic goals. NMC healthcare PLC is basically known
for the great corporate governance as their core framework and also the company is primarily
known for safety as well as ethics towards environment along with people.
This great failure of the corporate governance in NMC health care resulted in great decline in
their market share to around 11.4% and thus affected their overall stakeholders. Due to this
misapprehension, the confidence and trust of their customer ultimately declined in the company
and in the following year, sale and profit ratio of the company reduced to more than 45% and
this impacted their market position(Filatotchev, Poulsen and Bell, 2019). Along with this, NMC
healthcare also lost their most of the shareholders after this case and the company was later on
alleged to pay a handsome fine of around $613m towards end of year. Along with this, more than
12 investors filed accounting fraud upon NMC healthcare PLC as well as claimed that company
had been misleading them and lying for gaining funds.
1.3 Research Objectives
To understand the concept of corporate governance
To analyze the role of corporate governance within organizations
To explore the issues in corporate governance affecting organizations
To study the importance of financial statement transparency in corporate governance
Chapter 2: Literature Review
Concept of corporate governance
As per the view of Xia and et.al., 2017Corporate Governance contributes organization in creating
value, this includes entrepreneurial, innovation, development and exploration and provide
accountability and control system of the companies. Corporate governance is system of rules,
practices and processes through which a company is directed and controlled by its board and
management. Corporate governance significantly involves managing and safeguarding the
interest of various stakeholders’. In context of rules and regulations company is governed by
corporate governance but this is more than corporate law. In its practice corporate governance is
a well-laid out system, it leads to building of a legal, commercial and institutional framework
within all functions are performed. Objective of corporate governance is not limited to fulfilling
legal requirements of the company but it also includes commitment of board and its senior
officers in managing the company in transparent manner for ensuring long term value for its
shareholders. Diverse interest group such as employee, owners, managers, investors, business
partners and creditors are termed out to be crucial part to the enterprise. With help of providing
transparency in decision making process the entity can able to ensure success and develops
economic growth. Thus, one of the main issues of corporate governance is to influences their
plan of action and competitiveness. Thus, implementation of corporate governance leads to
create the conflict of interest among the member of the enterprise who is directly conflicts with
the objectives of corporation.
As stated by Habbash, 2016Corporate governance refers to the accountability of the board of
comapnies to all the stakeholders of the corporations, these are shareholders, employees,
To understand the concept of corporate governance
To analyze the role of corporate governance within organizations
To explore the issues in corporate governance affecting organizations
To study the importance of financial statement transparency in corporate governance
Chapter 2: Literature Review
Concept of corporate governance
As per the view of Xia and et.al., 2017Corporate Governance contributes organization in creating
value, this includes entrepreneurial, innovation, development and exploration and provide
accountability and control system of the companies. Corporate governance is system of rules,
practices and processes through which a company is directed and controlled by its board and
management. Corporate governance significantly involves managing and safeguarding the
interest of various stakeholders’. In context of rules and regulations company is governed by
corporate governance but this is more than corporate law. In its practice corporate governance is
a well-laid out system, it leads to building of a legal, commercial and institutional framework
within all functions are performed. Objective of corporate governance is not limited to fulfilling
legal requirements of the company but it also includes commitment of board and its senior
officers in managing the company in transparent manner for ensuring long term value for its
shareholders. Diverse interest group such as employee, owners, managers, investors, business
partners and creditors are termed out to be crucial part to the enterprise. With help of providing
transparency in decision making process the entity can able to ensure success and develops
economic growth. Thus, one of the main issues of corporate governance is to influences their
plan of action and competitiveness. Thus, implementation of corporate governance leads to
create the conflict of interest among the member of the enterprise who is directly conflicts with
the objectives of corporation.
As stated by Habbash, 2016Corporate governance refers to the accountability of the board of
comapnies to all the stakeholders of the corporations, these are shareholders, employees,
customers and society. This also includes giving a corporation a fair, efficient and transparent
administration. Corporate governance of the company also refers to code of conduct; this is
required to abide by the directors along with running the company as per all the corporate
governance. There are various reasons which Wide Spread of Shareholders, in this company has
very large number of shareholders spread all over the nation and even around the world. Through
corporate governance company can ensure well-being of all the shareholders. Corporate Scams
and Scandals is another reason for corporate governance. These days corporate are significantly
facing corporate scams and this is why it is important to have corporate governance.
.
Role of corporate governance within organizations
It is already stated that corporate governance is a system which supports companies in
making an effective decision by managing and directing them. In the context of roles of this
system Alsalim, Amin and Youssef, (2018) stated that this system influences ways as how
companies set and achieve their objectives. It also allows companies in managing as well as
monitoring risks and optimizing performance. It is considered as an effective system because it
consists of several principles, defined responsibilities and policies on which basis, all
stakeholders of companies including healthcare can overcome conflicts of interest and help
companies in accomplishing their goals. In addition, they also stated that corporate governance
system not only allows stakeholder to perform their activities and solve conflict of interest but
also work as like mediator between all stakeholders of company like company management,
board of directors, shareholders etc. By making them able to communicate and interact with each
other’s they shape corporation’s performance. It also allows them to deal with determining all
those ways which can make them able to take strategic decision. Taking an effective strategic
decision can be the key of the success of an organization.
On the other hand, in the context of importance of roles of corporate governance
Schijven, Haleblian and Kolev, (2017)said that it changes ownership structure in an effective and
positive manner. One of the main role of developing or using this system in companies is it
prevents companies against scams and frauds. In this context, it can be said that scams and frauds
are increasing day by day which can become the reason of poor image and poor productivity of
organizations. There are several ways by which hackers can scam and loot public funds in stock
administration. Corporate governance of the company also refers to code of conduct; this is
required to abide by the directors along with running the company as per all the corporate
governance. There are various reasons which Wide Spread of Shareholders, in this company has
very large number of shareholders spread all over the nation and even around the world. Through
corporate governance company can ensure well-being of all the shareholders. Corporate Scams
and Scandals is another reason for corporate governance. These days corporate are significantly
facing corporate scams and this is why it is important to have corporate governance.
.
Role of corporate governance within organizations
It is already stated that corporate governance is a system which supports companies in
making an effective decision by managing and directing them. In the context of roles of this
system Alsalim, Amin and Youssef, (2018) stated that this system influences ways as how
companies set and achieve their objectives. It also allows companies in managing as well as
monitoring risks and optimizing performance. It is considered as an effective system because it
consists of several principles, defined responsibilities and policies on which basis, all
stakeholders of companies including healthcare can overcome conflicts of interest and help
companies in accomplishing their goals. In addition, they also stated that corporate governance
system not only allows stakeholder to perform their activities and solve conflict of interest but
also work as like mediator between all stakeholders of company like company management,
board of directors, shareholders etc. By making them able to communicate and interact with each
other’s they shape corporation’s performance. It also allows them to deal with determining all
those ways which can make them able to take strategic decision. Taking an effective strategic
decision can be the key of the success of an organization.
On the other hand, in the context of importance of roles of corporate governance
Schijven, Haleblian and Kolev, (2017)said that it changes ownership structure in an effective and
positive manner. One of the main role of developing or using this system in companies is it
prevents companies against scams and frauds. In this context, it can be said that scams and frauds
are increasing day by day which can become the reason of poor image and poor productivity of
organizations. There are several ways by which hackers can scam and loot public funds in stock
markets and banks. But with the help of corporate governance, companies can prevent
themselves against all these scams and problems. One of the other main roles of corporate
governance is it increases investor trust which is importance and can be helpful for companies. In
this context, it can be said that investors consider corporate governance one of the important
factors as like financial performance when they evaluate companies for making decision of
investment. So, it can be said that by making an effective and appropriate use of corporate
governance system, companies can increase shares, revenues and trust of investors.
For supporting this view, Ahmad and et.al., (2018) interpreted that corporate governance
system allows companies to increase their valuation and add value in customers’ services. They
manage accountability as well as improve operational transparency which also make companies
able to fulfill expectations of investors. When investors and stakeholders feel satisfied than they
also support companies in accomplishing their goals. This satisfaction and accomplished goals
increase value of companies and make them able to take competitive advantages. With the ability
of an effective communication, board of companies can select, evaluate as well as compensate
the CEO and oversees the talent programs of the company, especially those related to executive
leadership and potential successors to the CEO.
Issues in corporate governance which affects organizations
There are several authors who stated that corporate governance is one of the main
effective systems which can help them out in accomplishing their goals. It also has several
benefits but on the flip side, it can also be said that corporate governance can create several
problems. There are some risks are associated with this system which can create barriers in the
path of the success of companies Ibrahim and Zulkafli,(2016) stated that accountability issue is
one of the main problems which is associated with this. In this context, it can be said that from
the top level executives to low-level tier employees, each level of corporation requires to report
and be accountable to another as like system of balances. Without proper accountability, each
division of actions of corporation may endanger success of companies and may cause
stakeholders to lose interest or willingness of investing in companies. When investors lose their
interest of investing in an organization then it may affect their reputation and number of shares
and sales.
themselves against all these scams and problems. One of the other main roles of corporate
governance is it increases investor trust which is importance and can be helpful for companies. In
this context, it can be said that investors consider corporate governance one of the important
factors as like financial performance when they evaluate companies for making decision of
investment. So, it can be said that by making an effective and appropriate use of corporate
governance system, companies can increase shares, revenues and trust of investors.
For supporting this view, Ahmad and et.al., (2018) interpreted that corporate governance
system allows companies to increase their valuation and add value in customers’ services. They
manage accountability as well as improve operational transparency which also make companies
able to fulfill expectations of investors. When investors and stakeholders feel satisfied than they
also support companies in accomplishing their goals. This satisfaction and accomplished goals
increase value of companies and make them able to take competitive advantages. With the ability
of an effective communication, board of companies can select, evaluate as well as compensate
the CEO and oversees the talent programs of the company, especially those related to executive
leadership and potential successors to the CEO.
Issues in corporate governance which affects organizations
There are several authors who stated that corporate governance is one of the main
effective systems which can help them out in accomplishing their goals. It also has several
benefits but on the flip side, it can also be said that corporate governance can create several
problems. There are some risks are associated with this system which can create barriers in the
path of the success of companies Ibrahim and Zulkafli,(2016) stated that accountability issue is
one of the main problems which is associated with this. In this context, it can be said that from
the top level executives to low-level tier employees, each level of corporation requires to report
and be accountable to another as like system of balances. Without proper accountability, each
division of actions of corporation may endanger success of companies and may cause
stakeholders to lose interest or willingness of investing in companies. When investors lose their
interest of investing in an organization then it may affect their reputation and number of shares
and sales.
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