The structure of procedures which control and directs a business entity by use of processes, regulations, and practices is referred to as the corporate governance. It practically revolves around balancing the interests of an organization’s various stakeholders like the consumers, investors, the suppliers, the government, the company’s management, the public, and bankers. Most organizations endeavor to establish an improved state of corporate governance, as most of the shareholders are not satisfied with the company’s profitability (Chen, Nov. 19, 2003). The shareholders expect the companies they have invested in to exhibit excellent corporate citizenship using ethical habits, comprehensive corporate governance customs, and environmental awareness. The board of directors, influences corporate governance in most organizations since bad management can discredit the company's transparency, reliability, and integrity and consequently, the financial status of the organization.
For a business to be socially accountable to its shareholders and the community, a self-regulatory approach known as the corporate social responsibility is adopted. This social accountability allows a company to impact positively to the environment and the public throughout its operations (Chen, 2007). In many instances of corporate social responsibility, companies give back to society through volunteer or philanthropic efforts, which turns out to be a great branding strategy for most companies. Apart from branding, public responsibilities are vital in the bonding between the corporate members and the employees.
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When a company's shareholders conflict with the management of the same company, the situation is referred to as an agency problem. For the problem to exist there must be a relationship between an agent and a principal where the agent is used by the principal to further their goals (Chen, Nov. 18, 2003). For instance, a manager takes the position of an agent for the shareholders who in this case, are the principals. Therefore, the manager acts to realize the maximum wealth accumulated by the principals while also working to maximize their own best interests. Even though it is impossible to do away with agency problems, principles can take measures to reduce the threats associated with agency costs.
Target’s Policy for Corporate Governance
Since wrong or inadequate policies relate to corporate governance, have financial implications on the company. The Target Corporation has adopted two relevant policies that are meant to safeguard the interests of the consumers, investors, the suppliers, the government, the company’s management, the public, and bankers (Chen, Nov. 19, 2003). One of the policies is the use of appropriate scales in the selection of auditors and giving them adequate corporation in their quest to examine the company’s financial statements. The other policy is the execution of robust compensation plan for corporate managers to help create an optimal incentive package.
Target’s Policy for Corporate Social Responsibility
The Target Corporation follows the guidelines set by the International Organization for Standardization 26000 that offers guidance and clarifications relating to social responsibility (Chen, 2007). Furthermore, the policy of adhering to the ISO 26000 will assist in translating the corporate values into successful accomplishments.
Target’s Policy for Agency Problems
To ensure that Target Corporation runs without emergence agency problems, the company board of directors which acts as the principal has set in place a policy that incentivizes the managers to always work on the giant department store’s interest (Chen, Nov. 18, 2003). After evaluation and identification of critical areas where Target stands to lose due to agency problems, the board has set in place policies that ensure that the agents are motivated to act in favor of the company.
Chen, J. (2003, November 18). Agency Problem. Retrieved May 29, 2019, from https://www.investopedia.com/terms/a/agencyproblem.asp
Chen, J. (2003, November 19). What Corporate Governance Means for the Bottom Line. Retrieved from https://www.investopedia.com/terms/c/corporategovernance.asp
Chen, J. (2007, October 28). Corporate Social Responsibility (CSR). Retrieved May 29, 2019, from https://www.investopedia.com/terms/c/corp-social-responsibility.asp