Exploring Corporate Governance: Issues, Theories, and Royal Commission

This essay provides an analysis of corporate governance, focusing on key issues such as transparency, accountability, and the rule of law. It examines the failure of boards and the prevalence of fraud, as highlighted by the Australian Banking Royal Commission. The essay explores corporate governance theories, including stakeholder and stewardship theories, in relation to the unethical practices observed in the banking sector. It concludes that effective corporate governance, characterized by transparency, accountability, and ethical leadership, is essential for maintaining trust and stability within organizations, and the failure to uphold these principles has led to significant issues, including funds misappropriation and stakeholder unrest. Desklib offers a wide array of resources including past papers and solved assignments to aid students in understanding these complex topics.

Corporate governance 1
Corporate governance
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Introduction
Corporate governance is the way a board of directors who are voted in or appointed by
shareholders of a company helps to ensure there is transparency, fairness and accountability in
the company. The director’s role is to ensure there is a working relationship between all the
stakeholders of the company. The framework of a company’s governance ensures there are; good
ways of conflict resolution since conflicts may arise between stakeholders, clear guidelines on
contract between stakeholders and the company and ensures there is good and constant
communication between all the members (Boretey 2017, p.714). This essay focuses on corporate
governance issues.
Arguments in the article
Failure of the board is the first argument presented by Chris Schacht in one of the AGM’s. This
is because the executives have embezzled funds worth billions that belong to the shareholders.
This therefore has led to the struggles which were being witnessed at the current moment. An
overwhelming 32%, 68% 88% of the shareholders of the different companies mobilized up and
voted vehemently against the reports in the annual general meetings which were held in the
course of the year. The misuse of funds creped in from delayed payments to shareholders and the
royal commission allocated to the executives who get paid for what they do not deserve at any
moment (Aguilera, Judge and Terjesen 2018, p 93). The alleged services to be provided to
customers as it was the promise of the executives had failed. The four big banks had suffered
strikes due to the way executives are over-remunerated.
Fraud is the other of concerned that has been outlined. Some of the companies’ executives are
engaged in money laundering activities at the cost of the shareholders. Dr Henry was booked an

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unnecessary first-class trip to the United States of America by a former employee of the
company who has constantly been under investigation. This shows it was a privately organized
deal to loot from the shareholders unaware. He later gave a comment that he was unaware that he
braking the law at that particular point in time. There are also fraudsters in the sector who charge
the customers for services not rendered (McDonough 2012, p. 1). For instance car dealers act as
agents for lenders without possession of any financial services license. Flex-commission has
been another orthodox means in which some individuals in the sector suffocate customers with
irrelevant interest for personal gains. Selling of funeral policies have also been outlined as an
aspect that has contributed to customers purchasing insurance that is null and void.
Issues in corporate governance
Transparency
This is the ability of an organization to undertake clear business practices that can be audited and
all the dealings are traced effectively. A transparent company is able to provide clear information
which can be understood in a layman’s language since some of the stakeholders may lack great
academic qualifications to understand complicated information (Jia, Huang and Zhang 2019, p.
227). The financial performance of a transparent company is easily tracked down by any
individual who have special interest on the company. the leadership of a transparent organization
is usually secure and deals with its customers freely without fear.
Leadership
A corporate company should have independent leaders who will foresee the activities of the
company without any external interference. Politics, social class and economic capabilities of an

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individual should not dictate the leadership of a corporate organization. Social ties such as
tribalism, nepotism and racism should not have any chance of manipulating the affairs of a
company (Smith 2014, p. 182). Those who will be either appointed or voted in by the
stakeholders owe them allegiance to undertake all the company activities according to the given
guidelines without showing favor to any member. Any decision the leaders should make must be
in the best interest of the company.
Accountability
A company should be able to explain each and every action taken in order to maintain trust from
its stakeholders. If for instance loses are incurred, the leaders should be able to explain the
genesis of the loses and give an assurance of compensation to the affected shareholders
(Mohanty and Stephen 2017, p. 244). The code of conduct of all stakeholders should be drafted
and shared with all the employees, customers, board members, executives and all shareholders in
order to avoid confusion when situations arise. Proper guidelines should be given to the
executives to ensure they are able to supervise all the activities of the company.
Relations with shareholders
A company obviously has different categories of individuals ranging from the executives, board
members, employees, customers and shareholders. To avoid contradictions, each individual
should be able to identify their role in the company so as to be able to serve each person’s needs
without causing unnecessary commotions (NicualeBordean and Pop 2012, p. 30). This will help
to stabilize the activities of the organization and inculcate a sense of belonging to the
shareholders an aspect that will lead increased membership due to marketing.

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The rule of law
A company should perform its duties within the boundaries that are set by the law of the country
it is functioning in. the law is always supreme and it protects the interests of each and every
individual within its demarcated locations (Yen, Chou and André 2013, p. 16). It should not
therefore be overlooked because stakeholder’s protection may then be compromised.
Compromising the law may lead to losing customers due to mistrust or at times misappropriation
of funds may set it due to the fact that no supreme authority will deal with the individual.
Corporate governance theories
Stakeholder’s theory
From its definition, the theory states that the people who are involved in an organization are the
ones who mainly and generally effect or are affected by the objective of the company. It is
evident in this case since the executives have effected the many changes that the shareholders
were not aware of. These changes have contributed to strikes in the four big banks due to
embezzlement of funds and failure to attend to the customers according to code of ethics
(Peterson and Colon 2013, p. 66). This theory presents a network relationship between the
executives and other stakeholders through employees, customers, shareholders and business
partners who are all present in the case of the banks. This network has made it possible for some
members to cultivate unwanted behavior in dealing with customers an aspect that has contributed
to unrest conditions as shareholders demand their rights. The executives have broken the rule of
law and failed to follow this theory since a majority of them have acted for personal interest
rather than to the best interest of the company and its stakeholders.

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Stewardship theory
This theory suggests the roles of the stewards who in this case are the executives who are
supposed to work with the aim of making profit and protecting the shareholders. The managers
in capacity according to this theory should put forth all their interests and integrate all their
objectives to be a section of the company. This means they do not work focusing on amassing
wealth on themselves but for the betterment of the company (Madhani 2017 p. 13). Contrary to
this, in our case we see the executives getting paid huge amounts of money and others looting
and getting payments of what they did not even work for. Some of the workers mistreat
customers and sell to them invalid insurance policies in order to get gain access to shareholders
money. the car dealers in our case are not also left behind since they cover up to act as agents to
the customers who wish to purchase motor vehicles and then end up doubling their interest rate.
All this happens due to individual’s failure to be accountable to the rules and regulations they
accepted to work under when the positions were given unto them.
Conclusion
Corporate governance is the system in which a voted in board of governors and executives work
hand in hand with the shareholders to ensure there is transparency, fairness and accountability in
a company. it helps to ensure all members are served with integrity and equality. Issues of funds
misappropriation and fraud are evident in the news articles presented. These issues have been
contributed by the several issues of corporate governance which include transparency, rule of
law, accountability, relationship with shareholders and leadership which the executives are
failing to exercise with diligence and integrity. The corporate governance theories that are related

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to the presented case are stewardship theory and stakeholder’s theory which are both acted on the
contrary by the executives of the companies in the related context.

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List of References
Aguilera, R. V., Judge, W. Q. and Terjesen, S. A. (2018) ‘Corporate Governance Deviance’,
Academy of Management Review, 43(1), pp. 87–109. doi: 10.5465/amr.2014.0394.
Jia, N., Huang, K. G. and Man Zhang, C. (2019) ‘Public Governance, Corporate Governance,
and Firm Innovation: An Examination of State-Owned Enterprises’, Academy of Management
Journal, 62(1), pp. 220–247. doi: 10.5465/amj.2016.0543.
Madhani, P. M. (2017) ‘Diverse Roles of Corporate Board: A Review of Various Corporate
Governance Theories’, IUP Journal of Corporate Governance, 16(2), pp. 7–28. Available at:
http://search.ebscohost.com/login.aspx?direct=true&db=buh&AN=125155988&site=ehost-live
(Accessed: 28 March 2019).
McDonough, W. J. (2012) ‘Issues in Corporate Governance. (cover story)’, Current Issues in
Economics & Finance, 8(8), p. 1. Available at: http://search.ebscohost.com/login.aspx?
direct=true&db=buh&AN=8518865&site=ehost-live (Accessed: 28 March 2019).
Mohanty, P. and Stephen, T. (2017) ‘The Challenges at JSW Steel: Brand Valuation and
Corporate Governance Issues’, Asian Case Research Journal, 21(1), pp. 231–251. doi:
10.1142/S0218927517500080.
Olusegun Boretey(2017) ‘What Corporate Governance Can Learn from Catholic Social
Teaching’, Journal of Business Ethics, 145(4), pp. 711–724. doi: 10.1007/s10551-016-3127-5.
Ovidiu-NicualeBordean and Pop, Z. C. (2012) ‘A Comparative Study of Corporate Governance
Issues: The Case of Germany and Romania’, IUP Journal of Corporate Governance, 11(1), pp.

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20–35. Available at: http://search.ebscohost.com/login.aspx?
direct=true&db=buh&AN=75242518&site=ehost-live (Accessed: 28 March 2019).
Peterson, P. and Colon, J. (2013) ‘Panel 2: Corporate Governance Issues’, Fordham Journal of
Corporate & Financial Law, 8(1), pp. 49–79. Available at:
http://search.ebscohost.com/login.aspx?direct=true&db=buh&AN=11137577&site=ehost-live
(Accessed: 28 March 2019).
Smith, R. C. (2014) ‘One Director’s View of Today’s Corporate Governance Issues’, Journal of
International Financial Management & Accounting, 5(2), pp. 176–188. doi: 10.1111/j.1467-
646X.1994.tb00041.x.
Yen, T.-Y., Chou, S. and André, P. (2013) ‘Operating Performance of Emerging Market
Acquirers: Corporate Governance Issues’, Emerging Markets Finance & Trade, 49, pp. 5–19.
doi: 10.2753/REE1540-496X4904S301.