Four Good Corporate Governance Practices and the Importance of Good Governance for a Large Private Company
Good Corporate Governance Practices
Having met with Focus Logistics Limited’s top management, it is clear that they wish to expand and that requires capital which they intend to obtain from prospective investors. However, to impress the latter, the company needs to understand the good corporate governance practice which is something not everyone in the top management level has embraced including the chair, Mrs White. The investors have criticized how the business is run and have stated that it functions as a family-owned firm with little oversight over management as well as a lack of functional controls plus reporting. Additionally, the different management spots especially the top ones, are given to relatives as well as close friends. Thus, there appears to be insufficiency of proper performance reviews as well as important succession planning. They also highlighted that the brand does not hold any board meetings or committees.
The founder argues that corporate governance has a record of slowing the board’s deciding procedure down and results in complications in running the firm. Therefore, both innovation as well as creativity is hindered, for instance, if she desires to add autonomous vehicles, this would be delayed before adaptation. The first practice is having governance frameworks as they can often be ignored. Nonetheless, they are the core of how an organization is governed. They should be designed to ensure effective boards, accountability to stakeholders as well as engagement with them, transparency concerning roles plus responsibilities, and driving sustainable business practices. The second practice has policies that align with the law as well as applicable regulations. Guidelines, as well as policies, are essential since they address important issues such as principles for daily operations and rules (Naciti, 2019, p.117727). They guarantee compliance with laws plus regulations, reflect an organization’s culture, provide guidance for decision-making, streamline internal processes and risk appetite.
The guidelines need to be updated as well as aligned with legislation and goals and a company’s strategy. In addition, they should be made easily accessible to ensure that all individuals comprehend the way things need to be done plus how they are supposed to behave. The third practice is effective board reporting since they encourage boards to perform at their best level. A survey revealed that performance is greatest when they get good quality reports that contain adequate data for them to decide productively plus develop business approaches for short as well as long-term sustainability and growth. The challenges for management in preparing a fit-for-purpose report for the board include time-consuming as well as inefficient procedures (Naciti, 2019, p.117727). Others include inconsistency in styles as well as difficulty in determining the purpose plus the output needed from the board.
The fourth good corporate governance practice that a company can have is setting subsidiary governance policies. Subsidiaries are common in nowadays’ business landscape since corporations across several jurisdictions plus business areas. To guarantee that corporate governance principles are consistently and effectively cascaded down to the subsidiaries and also that subsidiary boards understand their responsibilities, an organization must establish a subsidiary governance scheme. Additionally, they need to set out rules regarding the subsidiaries’ oversight that uphold their sanctity and decision-making (Naciti, 2019, p.117727). It is also important that it offers guidance to the boards on the roles as well as responsibilities plus reporting requirements to the parent firm.
Importance of Good Governance for a Large Company
Good governance guarantees that a board has regular meetings retains control over the business, and is clear in the responsibilities and maintaining a risk management system. The organization’s secretary will be in charge of ensuring that the board’s procedures are adhered to and that every pertinent rule and regulation is followed (Mutlu et al., 2018, p. 944). He or she ensures that the company keeps the local registrar of organizations updated with any important filings. Corporate governance can include other duties even though the system will often differ.
Applying good governance in the corporate sector assists the company control risk as well as reducing the chance of getting corrupt. Often, fraud and scandals within an organization become more likely where senior management and directors do not have to adhere to a formal code (Mutlu et al., 2018, p. 946). The board needs to meet often, retain their control over the business as well as monitor those individuals in management to allow it to see how the firm is operating. Moreover, a good scheme makes it clear to all company officers about their duties plus will inspire them to remember them when deciding. Implementing a great governance system ensures that a company protects its officers, members, and management. They are protected by guaranteeing that it retains records and maintain statutory registers.
Maintaining such records means that company officers are held accountable for their actions via documentation if necessary. This also means that shareholders cannot contest the officers’ actions. They can be allowed to see the company books, approved resolutions, plus board minutes if needed and be assured that the officers are following set guidelines. Good governance is something that a company, regardless of whether or not they plan to expand, needs to understand (Mutlu et al., 2018, p. 946). In an attempt to sell a company or refinance, investors, as well as buyers, will look for a well-organized business scheme. One without updated books as well as registers is improbable to attract the finest buyers.
Moreover, firms are becoming more aware of their reputation as well as obliged to practice ethics. By practicing good governance, holding meetings, and deciding as a board, these aims can be remembered. The public also feels that the brand is trustworthy, eventually helping its reputation grow. The concept of corporate governance has become an important tool in the growth and management of companies plus will continue to grow in significance (Mutlu et al., 2018, p. 949). It is recommended that every organization take steps to increase its governance system’s value to better the business functioning.
Significance, Benefits, and Challenges of Producing a Sustainability Report for a Business Within the Logistics Industry
Significance
A sustainability report is one that an organization releases to offer information regarding social, economic as well as environmental performance. It tracks whether or not a firm’s human development objectives are reached. Releasing one is a chance to engage stakeholders and convince investors. It reflects a brand’s endeavor in dealing with climate and ecological matters. It is a mechanism of improving and internalizing efforts towards sustainable development. This is the process of bettering the present situation without negatively affecting the future (Mohamed, 2018, p.256). The significance of sustainability in logistics or supply chains goes beyond going green. The chain established on a sustainable platform enabling more partnership chances due to environmental responsibility is a vital central point in the industry nowadays. Being eco-aware in all aspects of a business betters the reputation as well as further solidifies an organization.
A sustainable supply chain also aids in bettering productivity while saving funds at the same time. By utilizing sustainable resources as well as techniques, an organization increases the efficacy of machinery at great cost savings. For instance, Nike, which is the world’s top shoe manufacturer, is a good example of sustainability at work. The company has changed how it produces some of its shoes as well as reduced labor costs by up to half whereas material use by twenty percent. A sustainability report helps in ensuring that a company remembers the objectives on the matter and does things needed to achieve it (Mohamed, 2018, p.258). It acts as a benchmark whereby every individual working in the company tries to check whether they are in the right direction or not.
Benefits
There are several benefits of sustainability reporting, for instance, boosting employee morale credibility and impressing investors. There is a feeling of pride in an employee understanding that the company they work for cares for others or the community. They comprehend that they are contributing too to sustainability development. In addition to motivation, it also ensures employees remain loyal to an organization. It builds goodwill on the reader, which also leads to higher retention rates. This also offers an opportunity to better the team (Mohamed, 2018, p.260). It is important to note that not every sustainability effort is intended to measure work thus, it is a great opportunity for people to learn what can be productive or not.
By being open and transparent concerning the economic, social as well as environmental effects of the business, a company builds credibility. The public is always fast to highlight issues about sustainability on social media. By being serious about dealing with such matters, an organization can build a strong profile with audiences of different demographics and develop a good brand. Additionally, the report improves the level of trust from stakeholders, as suggested by (Mohamed, 2018, p.260). By having a report on sustainability data, a firm is awarded certifications as well as accreditations that improve its reputation. An investor is now expecting a firm to publish a report to understand their endeavors and their real value. It also offers them a notion concerning the tangible as well as intangible assets.
Challenges
Some of the challenges of producing a sustainability report for a business within the logistics industry include a lack of universal comparability as well as transparency. The GRI has made efforts to better sustainability reporting by particularizing the data that every firm needs to offer on environmental, economic, and social performance. The guidelines are followed by more than seventy percent of the world’s biggest organizations, but they also include exceptions. A company can claim that a needed disclosure does not apply to it or that the requested data is confidential or unavailable.
The exceptions cause difficulty in contrasting sustainability performance between organizations or for any particular one over time. One of the biggest challenges in creating sustainability reports is transparency. Many of the signs are easy to identify, for example, an organization can report high local community engagement by having token programs in every of its operation even if they are not effective. Various firms have attempted to address this by hiring external auditors, as suggested by (Mohamed, 2018, p.262). However, an auditor can only certify the number of the programs but not the efficacy.
Summarize the Benefits and Challenges of Sound Risk Management Practices for a Logistics Company
Benefits
Sound risk management practices offer various benefits to companies, especially those in the logistics industry. For instance, it is easier to identify projects in trouble. These practices let one see where a project needs attention and its types (De Oliveira et al., 2021, p.126517). Good risk management can help provide the context for comprehending a project’s performance as well as contribute to any medical checks, audits, or peer reviews.
Another benefit of sound risk management practices is that they help reduce surprises. Leaders in different organizations do not appreciate being surprised. These practices allow teams to improve their communication about project issues in a timely manner since they can identify them much earlier (De Oliveira et al., 2021, p.126517). Early awareness of possible issues means that intervention can be planned for mitigation before it becomes too severe, as suggested by (Amaratunga et al., 2018, p.1165). Lastly, it leads to better quality data used in decision-making. Top leaders can have access to better quality as well as more useful data, which allows them to decide better. According to the latest data, decisions are made due to the ability to access information about risks in real-time via a project management dashboard.
Challenges
Although there are benefits, there are also challenges such as failure to utilize proper metrics and mistreatment of identified risks. VaR is among the popular metrics, but it can only tell the biggest loss the organization expects at a particular confidence level. It informs nothing concerning the loss distribution that exceeds the metric. This would suggest its application does not assure the success of risk management. Additionally, the efficacy of implementing it relies on the financial market’s liquidity, which, if otherwise, daily measures using the metric lose the meaning. This happens since if an organization settles on a portfolio that is untradeable, a daily VaR measure is not a measure of the risk of the portfolio since the company is stuck with it for a much extended period. A risk manager sometimes makes mistakes in evaluating the possibility or the magnitude of losses. Similarly, they could utilize the wrong distribution (De Oliveira et al., 2021, p.126517). For a fiscal institution with various positions, even though they may appropriately approximate the distribution related to every position, the correlation may be measured inaccurately.
Reference List
Amaratunga, D., Malalgoda, C., Haigh, R., Panda, A. and Rahayu, H., 2018. Sound practices of disaster risk reduction at local level. Procedia engineering, 212, pp.1163-1170. Web.
De Oliveira, U.R., Neto, L.A., Abreu, P.A.F. and Fernandes, V.A., 2021. Risk management applied to the reverse logistics of solid waste. Journal of Cleaner Production, 296, p.126517. Web.
Mohamed, M., 2018. Challenges and benefits of Industry 4.0: an overview. International Journal of Supply and Operations Management, 5(3), pp.256-265. Web.
Mutlu, C. C., Van Essen, M., Peng, M. W., Saleh, S. F., & Duran, P. (2018). Corporate governance in China: A meta‐analysis. Journal of Management Studies, 55(6), 943-979. Web.
Naciti, V. (2019). Corporate governance and board of directors: The effect of a board composition on firm sustainability performance. Journal of Cleaner Production, 237, 117727. Web.