Organizational operations are complex and dynamic in every country. With increased globalization over the years, it is evident that big firms are borrowing managerial operations and strategies from each other. Therefore, various companies are adjusting their organization to allow their operations to sync with those of their international partners. The Organization for Economic Corporate and Development (OECD) is instrumental in guiding these changes. They published the ‘Principles for Corporate Development’ in 1999 which included fair business practices that encourage transparency with shareholders and competitors ( Lazonick, & O'sullivan, 2000) . This document was recently updated to include various principles of corporate governance and revised roles of every stakeholder. This update makes organizational management much easier and questioned traditional roles that they had previously included. However, before applying any of these principles requires understanding the factors that guide them. This essay focuses on this aspect in a bid to determine the groups that are affected by the principles of corporate governance.
One factor that guides the principles is the type of organization. The principles were written for organizations that are publicly traded or that have shares owned by the general public. This is mainly because the OECD is encouraging companies to be open with their shareholders and accountable for their trade decisions. Some of these public companies are listed on the stock exchange while others are not. Therefore, the principles are ideal for listed rather than unlisted firms. Also, they are desired for be financial or non-financial organizations. On the other hand, private companies are welcome to use the principle where applicable. Additionally, principles of corporate development are encouraged for larger organizations than smaller ones. They are written to embrace firm with an elaborate managerial system rather than establishments with simpler structures. Ultimately, the corporate principles or governance have information that can help all company owners improve their business practices.
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The corporate principles of governance are also affected by the shareholders of an organization. The document openly realizes that each shareholder has a role, responsibility and rights. Thus, its application depends on the shareholders involved within an organization. First, the principles focus on the Board of Directors as the beginning of the companies’ chain. Their role is to oversee the other shareholders and make decisions that boost the revenue and income. They have a responsibility to promote transparency by offering adequate information of finances and operations. Also, it is within their rights to withhold data from their competitors to retain their advantage. The corporate principles of governance acknowledge employees and corporate officers ( Tricker, & Tricker, 2015) . They are in charge of the day to day operations and implementation of company policies and strategies. They have the right to participate in organizational advantage by criticizing poor practices and offering solutions with guarantee of job safety.
The corporate principles of governance elaborately emphasize the importance of shareholders. These are the equally important participants that often left exposed and their interests are not protected. According to OECD document, the shareholders are very influential in determining the economic climate. Their main role is holding the organization accountable for their financial decisions since they provide the funds that keep the organization running. It is within their right to demand information from the organization owners and challenge the credibility of the board of directors. Individual investors also have similar roles and responsibilities. Working together with this group of shareholders motivates them to champion the company’s direction. Having their support allows company owners and manager push reforms and decision faster. Also, they motivate the implementation process by giving input and offering various resources to motivate the progress. The shareholders and investors are considered the bridge between the organizations and the market since they take on role as marketers and advocates.
The corporate principles of governance depend on organizational objectives. Therefore, strategists must take into account some of the suggestions offered in the OECD documents. Applying the business practices in this document influence positive growth financially and geographically. Establishing economic reality is a key process to determining the steps an organization needs to embrace to move on. The document urges focus on regulating internal control by setting up control points to monitor goods and services to keep up quality of standards. The control point system is rigorous and demands that each procedure is a value adding experience. Emphasis on risk management is also included. The board of directors is charged with carrying out research to ensure that risk is foreseen and measures to minimize or avoid impact are in place. Consequently, they must strategize for future intentions and expected challenges.
Market segment or target market is also affects principle of corporate governance. This organizational guide is availed for companies with a global market segment. The OECD recognizes the need to satisfy clientele from different backgrounds and business areas. They are aware that such large organizations must have procedures to accommodate their international markets. Therefore, the legal and regulatory framework must embrace the international expectations. For this reason, the document recommends transparency and inclusion in voting. It discourages practices that would create an unhealthy competing environment. Some of these situations include insider trading and market manipulation. Such factors are likely to deter the target market from a specific firm or country. Consequently, it hurts the shareholders and deters customers who feel the organization is using them for income and not providing a worthy service. Thus, at the end of the day, implementation of the principles of corporate management influences the customers and consumers of a firm.
Company values and virtues are factors that influence these corporate principles. These values and virtues are often included in the mission and vision statements. The OECD hopes to ingrain a culture of honest business practices ( Demise, 2006) . Therefore, the business managers and board of directors must have this positive approach to enforce these principles. An organization should also create an environment that shares similar values among all shareholders. The business owners, suppliers, managers, employees, clients and other stakeholders need to establish that they are working towards similar goals and that their interactions have portray these beliefs. The document is inclusive of roles for each shareholder. Without shared values the efforts of each shareholder will not come together to guarantee an operational organizations.
In conclusion, the eight principles of corporate management are very flexible. They focus on major and minor firm decisions that can help all business operators to improve their operations and overall relationships. Therefore, all companies should direct their efforts towards good governance, establish an elaborate structure, respect the roles and participation of each shareholder, proper internal control, and risk governance, core values such as integrity and financial responsibility through auditing. The principles are also practical. They have no expectation of perfection since every organization has its challenges. Although, it helps prioritize actions and determines which actions or investments are better for economic structures. Such a document is ideal to study the economic situation of the country and especially larger organizations that are leading it in their industries. Most notably, the principles are not binding. They simply shed light on corporate objectives and suggest a variety of means to attain these aims. Proof of their validity is in the adoption by other organizations such as Financial Stability Board’s Key Standards for Sound Financial Systems. Ultimately, the document can be summarized as worthy business advice.
References
Demise, N. (2006). OECD principles of corporate governance. In Corporate Governance in Japan . Springer Japan.
Tricker, R. B., & Tricker, R. I. (2015). Corporate governance: Principles, policies, and practices . Oxford University Press, USA.
Lazonick, W., & O'sullivan, M. (2000). Maximizing shareholder value: a new ideology for corporate governance. Economy and society .
