Understanding Corporate Governance and Archie Carroll's Pyramid Model

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 2...................................................................................................................................1
1) Understanding of corporate governance............................................................................1
2) Explanation of Archie Carroll's Pyramid model ...............................................................2
Conclusion ......................................................................................................................................4
References........................................................................................................................................5

TASK 2
INTRODUCTION
In present times corporate governance is a major concern for many companies. Due to
occurrence of many issues in social sector, government is highly focusing on improving the CSR
activities of government (Ni and Van Wart, 2015). In order to sustain for long term it is very
necessary for companies to engage more in CSR activities. Also, it helps in creating a better
image in minds of people. This report will describe what CG is and its history in UK.
Furthermore, it will show 5 responsibilities of BOD and it will explain Archie pyramid model of
CSR and how it is used. The organisation selected is Rolls Royce that belongs to auto mobile
sector.
1) Understanding of corporate governance
Corporate governance represents a set of rules and regulations which is followed by
company stakeholders in doing business. These rules also define structure or process through
which goals and objectives are developed (Lins, Servaes and Tamayo, 2017). Moreover, with
this it becomes easy to determine performance of company.
Corporate governance is not an older concept but it emerged 20 years ago in UK. The
history of it can be understood only when in May 1991 a committee was set up by financial
reporting council. This was due to concerns in standards in financial reporting and on Maxwell
cases. Here, some rules and regulations were laid down which was incorporated into LSE's
listing rules. These were introduced as principle of comply. There were several recommendations
which were made such as:
 Chairman and CEO of companies will be separate
 There will be at least three non-executive directors
 Board will have an audit committee on non-executive directors
Then in 1995 some more principles were set in Greenbury report related to remuneration
of non-executive directors. In 1998 the Hampel report was final and produced two combined
codes. The report objective was to incorporate and illustrate clearly the Cadburry and Greenburry
recommendations. Therefore, in this way the concept of CG was emerged and it was slowly
implemented by all business in different countries.
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There are several responsibilities which are to be performed by Board of Directors
(Grinstein and Blekher, 2015). It is their moral duty to perform it. They differ according to
company size and country corporate governance. Also, it can be different according to culture of
organisation. They are described as follows:
Trusteeship – it is the main responsibility of Board of Directors in which they have to act as
owner of company. They have to run business for long term but not for own purpose (Roles and
responsibilities, 2018). Also, they are property holders of any organisation.
Formulation of mission, objectives and policies - here, BOD have to formulate entire goals and
objectives of company. Moreover, they are having the right to reform it. Besides this, BOD
develops long term strategies and implements them.
Financial sanctions - where BOD need to decide the overall financial plan of company. They
take foremost financial decisions about distributing of profits, shares and loans. (Grayson and
Hodges, 2017). They are also responsible for reviewing financing performance of business and
reform policies and strategies.
Designing organisation structure – Board of Directors designs and develops overall
organisation structure. This is done by analysing competitors, goals, rules and regulations.
Selecting top executives – their main role is to select and appoint appropriate top executives at
different levels in organisation. This must be done properly so that they can handle and manage
overall company in effective way.
2) Explanation of Archie Carroll's Pyramid model
With rise of CG, CSR was also followed by companies. These both concepts are similar
to each other. CSR refers to the activities which are followed by organisations to contribute
towards society. It consists of ethics and moral responsibilities of company through which
business is done. CSR enforces business to work for betterment of society as well (Clapp and
Rowlands, 2014). There are many activities which are performed such as protecting
environment, promoting and health. Every business has to be socially responsible so that they
can contribute towards it and build a positive image in society. Through this, they are able to
retain their customers and sustain for long term. If business is not socially responsible it can lead
to its closure as well. There are some examples of companies who were not socially responsible.
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