BUA5CG Corporate Governance: Analysis of Issues in Globalisation

This case study provides an analysis of corporate governance issues in a globalised world, focusing on gender diversity, stakeholder engagement, and remuneration policies. It examines the increasing representation of women on corporate boards in Australia and the challenges of balancing gender diversity with social connections in board member recruitment. The study also addresses the importance of skill-based frameworks, independent directors, and appropriate remuneration policies for effective corporate governance. Recommendations include implementing strict recruitment policies, ensuring board independence, and aligning remuneration policies with organisational objectives. The analysis draws upon various media articles and research to illustrate the complexities and potential solutions for improving corporate governance practices in a global context. Desklib provides similar solved assignments for students.

Running head: GOVERNANCE IN GLOBALISATION WORLD
Governance in globalisation world
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Introduction
Corporate governance shapes and guides the organisation into working and
functioning systematically. The board of directors constructs the framework of regulations
and practices by which the organisation functions. Now, it is obvious that these practices
differ from one another according the government policies and the objectives of the
organisations. In the following discussion a thorough analysis of various issues that arise in
corporate governance world is enunciated.
Response to question 1 (a)
The incorporation of gender diversity in the world of corporate governance have
gained a lot of attention in recent time. However, the actions taken towards this inclusion in
organisations have been at a slow pace. The issues in the article by Patten (2018) is that there
is an increased proportion of women working on the boards of Australia’s largest companies
that continues to rise with a score of 28.3% from 25.4% reported a year before. The increase
in this context show that there are huge number of women who are designated at the senior
most position of leadership ASX200 or corporate governance companies. Therefore, it is
evident that the gender diversity are gaining the lot of attention as found out in the article and
the corporate governance principles are need to be introduced for the gender equality.
According to such principle, the board need to ensure the strategic management of the
company, the proper monitoring of the management and need to act responsibly towards both
the society and the shareholders. This looks after the scope of equal opportunities among men
and women have been a rising issue over the period in distinctive fields (Patten, 2018). The
inclusion of female board members in leading organisations of Australia have gained
momentum in recent scenario. The recent figures have shown an increase of 3.1% of women
on Australia’s boards compared to previous year’s outcome (Patten, 2018).

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On the contrary, in the second article by Starbuck, (2014), the author highlights the
issue by arguing over the issue of corporate governance and recommends a possible way to
engage the stakeholders in the functions of governance. However, the article ushers four
major issues, firstly it has been argued that various kinds of organisation needs to have
different types of government procedures. Secondly, humanity needs to set up priorities for
their objectives, thirdly ideas about the governance needs to be concerned with the
technological and social changes that are operating within the organisation. Finally, the board
of directors usually exercise a weak form of governance in relation with the governance by
the management hierarchy. Therefore, based on the issues, the article outlines a necessity to
enhance the nature of managerial governance as well as the behaviour of the stakeholders.
The benefits of diversity among the board of directors have been realised by majority and
because of which this is a raising topic in the world of corporate governance around the globe
(Starbuck, 2014). The Board of Directors of any organisation plays a major role in decision-
making and as a result of which have a strong influence over the organisation for a long run.
In addition to this, the increasing pressure from the shareholders for incorporating greater
diversity in organisations have paved the way for including gender diversity in the world of
corporate governance (Patten, 2018).
In context of this, it can be said that in today’s world, the appointment of board
members in large companies are heavily influenced by social connections (Smith, 2018).
Therefore, discarding the aspect of fair play and justice in the selection procedure of
members in board members as well as in choosing the staff members. It has been observed
that huge companies tend to appoint the members of the board not from any outside source
instead from the social connections established with the existing or former member of the
board (Kramarz & Thesmar, 2013).

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In doing so, the organisations are neglecting the qualified and efficient candidates but
lack any social connection or tie up with the inside members of the Board. In fact, the focus
of recruitment of board members have shifted from quality of the candidates to social
connections that the candidate have with the other members of the board. The issue of
recruiting board members based upon the social connections have been existent in today’s
world as well. Henceforth, jeopardising the very role of executing equality and fair play
within the world of corporate governance.
Response to question 1 (b)
Channelling diversity in organisations have become a major initiative in recent times.
The diversity theory involves the Diversified board members or staff members within an
organisation could contribute tremendously towards the success of it in the competitive
market. There are many small and big companies that have diversified members like the
Chief Diversity officer, recruiter, D&I consultant and others. The acceptance of the
companies for the diversity of thought and therefore the cultural diversity enhances the
actions of the company (Abatecola, Mandarelli & Poggesi, 2013). The chosen article showed
that there has an increasing consensus that gender diversity has capability to enhance the
financial and social performance of the companies. This is because female directors who are
working on boards of the companies have constantly grown during the current period.
Therefore, the issue of gender balance within corporate organisation has increased in the
current year. As stated by Rao & Tilt (2016), research in this context highlighted that Women
tends to focus more on the environmental behaviour and climatic change along with
increased focus on work oriented activities that are necessary for the organisation (Peregrine,
2018). According to the diversity of thought based corporate governance theory, the board of
members has an essential role in resolving the issues by ensuring the balance in between
different members and the managers. In this context, the diversity has the capability to

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enhance the board with different skills experiences and behaviours (Albers, Wohlgezogen &
Zajac, 2016).
In context of selection of member for the board, the participation of women have
increased in Australia since the previous year. The new figures demonstrate that the
percentage of female directors in the field of board members have hit the figure of 28.5%
(Patten, 2018). Even though this figure is a progressing result still the ideal target of
achieving gender diversity is lagging behind. According to John Mulcahy of Mirvac, the ideal
target of incorporating female directors is 50% however, the results are far from reaching this
target (Patten, 2018). Even though the inclusion of gender diversity in the field of corporate
governance have been raised and incorporated to some extent. The inclusion of this
regulation is still lagging behind as there are still major companies around the world that do
not practice this regulation (Basu, 2018).
In addition to this, the issue of recruiting board members based upon social
connections instead of the candidates qualities have been existing over a long period. The
regulation of executing independent directors board in organisation have been jeopardised
because of this issue. The vine of social connections and its impact in the recruitment process
is an ill practice that defies the regulation that the world of corporate governance means to
execute. In addition to this, the practice of recruitment strategies such as referrals have been
encouraging this issue to a whole new extent (Claessens & Yurtoglu, 2013). Therefore,
impacting upon the organisations reputation and success.
Response to question 2
The issue of bringing in diversity among the board members have been highlighted in
contemporary time in the world of corporate governance. Even though the awareness to this
issue have given rise to organisations actively incorporating regulations that would promote

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diversity among the board members of the organisation. In order to regulate diversity in
boardrooms it is extremely essential that a skill-based framework of the organisation be
established (Deloitte.com, 2018).
From the article stated by McCahery, Sautner & Starks (2015), the first issue is that
the larger organisation have several degrees of freedom, those impacts on the efforts to
control the operations. Therefore, in order to manage the issues, there has to be major
changes made within the corporate governance strategy. Boards and directors of the
organisation hardly take any stringent actions against the management. Therefore,
governance laid down by the management can be expanded effective when the senior
managers takes the inputs from the people whom they perceive as subordinates, everyone
including the CEO of the organisation needs to listen more careful to solve certain issues
within organisation. Again, in case of gender diversity issue, it can be recommended that
heterogeneous members of board’s will be able to satisfy the needs of various stakeholders of
the company and will be able to supervise the behaviour of the executive in a stronger way
(Peregrine, 2018).
From the article stated by Smith (2018) the second issue that have been existing over
the period is the recruitment of board members depending upon their social connections
instead of their skills. For the discarding this issue and improving the scenario, a strict
recruitment policy shall be incorporated within the organisation (Wilensky, 2015). This
regulation shall eradicate any practice of referrals or recruitment via social connections and
would strictly hire board members depending on their quality and experience. In United
States the Securities and Exchange Commission (SEC) regulations ensures that the board of
directors would be independent and therefore, the term ‘independent directors’ come into
existence (SEC.gov, 2018).

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From the article stated in the Financial Review, (2018) the third issue that are quite
often appear in the world of corporate governance is the lack of appropriate remuneration
policy that have are incorporated within the organisation. Since the policy are approved in
accordance from the Board of Directors and the Management team, a bad managerial
decisions often lead into consequences. Therefore, the management team that have the expert
experience regarding the organization structure have the capability of foreseeing the possible
threats affecting the regulation. This shall help in avoiding the clash of remuneration policy
with that of objectives of the organisation. Henceforth, the management plays an extremely
significant role in the regulation of the remuneration policy and guidelines in any
organisation.
Conclusion
Therefore, form the above discussion it can be said that the significance of corporate
governance is essential in any organisation. However, the rules and regulations incorporated
within the organisation must not be vague and establish suitable standards. The above
mentioned recommendations shall help in tackling with the issues related to corporate
governance.

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References
Abatecola, G., Mandarelli, G., & Poggesi, S. (2013). The personality factor: how top
management teams make decisions. A literature review. Journal of Management &
Governance, 17(4), 1073-1100.
Basu, A. (2018). The challenge of local feminisms: Women's movements in global
perspective. Routledge.
Claessens, S., & Yurtoglu, B. B. (2013). Corporate governance in emerging markets: A
survey. Emerging markets review, 15, 1-33.
Financial Review. (2018). afr.com APRA: Bank pay is out of step and must change. Retrieved
from https://www.afr.com/business/banking-and-finance/financial-services/apra-
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20180906-h1501q
SEC.gov | Boards of Directors, Corporate Governance and Cyber-Risks: Sharpening the
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Smith, S. (2018). Company boards are stacked with friends of friends so how can we expect
change?. Retrieved from http://theconversation.com/company-boards-are-stacked-
with-friends-of-friends-so-how-can-we-expect-change-95790

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Starbuck, W. H. (2014). Why corporate governance deserves serious and creative
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