TABLE OF CONTENTS After studying this chapter, students should be able to describe:
the nature of corporate governance;
the main features of the Combined Code of corporate governance;
the nature of corporate social responsibility;
the nature and range of ethical concerns;
the Ethical decision models;
the potential costs poor business ethics;
the potential benefits of positive business ethics.
Corporate governance is the process whereby people in power direct, monitor and lead corporations and thereby create, modify or destroy the structures and systems under which they operate.
There are different international models of corporate governance. For example, the European model, as operated in Germany, requires large public corporations to have two-tiered boards a supervisory board and a management board. The latter is accountable to the former which has employee, shareholder and third-party representatives. This structure ensures that companies are legally accountable to both their shareholders and their employees. There are strengths in this model inasmuch as it has strong governance procedures, while sustaining long-term business growth and stability. On the other hand, it is quite vulnerable to global economic pressures.
In the UK, with a single-tired board system of executive and nonexecutive directors (NEDs), the prime legal responsibility of plc boards (see Chapter 4) is to their shareholders, although they also have certain statutory obligations to their employees, customers and suppliers. The UK model of corporate governance is designed to provide a dynamic market orientation with fluid capital resources and is mainly concerned with corporate profits...
