Corporate governance is the set of laws, customs and procedures that regulate and control an organization. It means finding a balance between the interests of the many components of a company, including shareholders, management, customers, suppliers, financiers, government and the public.
On the other hand, ethics refers to the moral principles and ideals that guide the behavior of people and organizations. Regarding right and wrong, good and bad, just and unjust, just and unjust, ethics is concerned.
Since ethical behavior and ethical decisions are necessary for effective corporate governance, there is a close connection between corporate governance and ethics. Honesty, transparency, fairness, responsibility and accountability are components of ethical corporate governance.
A company is more likely to earn the trust of its stakeholders, attract investment, and sustain its long-term growth and success when it operates with sound corporate governance practices. On the other hand, a company that engages in unethical behavior and poor governance is more likely to face legal and reputational risks, financial losses and a loss of stakeholder trust.
HISTORY OF CORPORATE GOVERNANCE
The idea of corporate governance first emerged in ancient times, and it was mainly focused on the management of public facilities such as marketplaces, ports, and temples. However, as companies grew larger, more complex and more important in the global economy, the current notion of corporate governance emerged throughout the 19th and 20th centuries.
In the United States, important legislative decisions and regulations such as the Sherman Antitrust Act of 1890 and the Securities Exchange Act of 1934 helped create the corporate governance environment. These rules attempted to promote honest competition and openness in business dealings.
The corporate governance movement grew in popularity in the United States during the 1960s and 1970s, with an emphasis on the duties of the corporate board and shareholder rights. Shareholder activism increased in the 1980s as investors began to press boards for greater accountability and transparency.
Several business scandals occurred in the 1990s and early 2000s, including those involving Enron and WorldCom. As a result, corporate governance procedures are now subject to increased scrutiny and oversight. The Sarbanes-Oxley Act of 2002, which aimed to increase the accountability and openness of company boards and senior management, was one of the resulting corporate governance regulations and recommendations.
The 1992 UK Cadbury Report, which called for more accountability and openness in business operations, had an impact on corporate governance standards in Europe. The result of the study was the UK Corporate Governance Code, which many other European nations have since adopted.
With ongoing discussions and debates about the duties and rights of company directors, shareholder rights and the call for greater accountability and transparency in corporate operations, corporate governance remains a critical issue for companies and stakeholders around the world today.
IMPORTANCE OF CORPORATE GOVERNANCE
Corporate governance is important for several reasons:
1. Accountability: Corporate governance enables companies to be held accountable for their actions and decisions. This is critical to maintaining the trust and trust of everyone involved, including shareholders, customers and employees.
2. Transparency: Good corporate governance promotes the disclosure of relevant information to stakeholders and openness in decision-making. This allows everyone to access the same information and make informed decisions.
3. Ethics and Values: Corporate governance helps promote moral behavior and ethical business practices. This is critical to maintaining the company's reputation and ensuring it operates in alignment with its values and mission.
4. Risk management: Good corporate governance makes it easier to identify and control risks that could damage a company's image or performance. Included are risks in connection with the economic success of a company, social and ecological responsibility and compliance with laws and regulations.
5. Long-Term Viability: A company's long-term viability and success depends on its ability to practice sound corporate governance. This includes ensuring that the business has a clear strategy, is well run and runs in a way that creates long-term value for all stakeholders.
ETHICAL PRINCIPLES FOR A GOOD BUSINESS
Good corporate governance requires compliance with several moral standards. These ideas include:
1. Integrity: According to this principle, people and organizations must always behave honestly and fairly. It means being honest, open and accountable for one's actions.
2. Responsibility: According to this concept, people and organizations must take responsibility for their actions and their impact on stakeholders. It means taking responsibility for your actions and taking action to repair damage.
3. Fairness: According to this concept, all people must be treated equally and fairly, both by individuals and by organizations. This includes ensuring that decisions are made on the basis of merit and avoiding discrimination and favouritism.
4. Respect: According to this principle, all people must be treated with dignity and their rights protected. It involves being polite, compassionate, and intelligent to others.
5. Citizenship: This principle requires people and organizations to behave responsibly in the communities in which they operate. It means advancing social justice, protecting the environment and serving the common good.
6. Following these ethical guidelines for corporate governance can promote trust, protect the organization's reputation, and promote long-term success.
IMPACT OF COVID-19 ON CORPORATE GOVERNANCE
Corporate accountability has been significantly impacted by the COVID-19 pandemic. The following are some ways the pandemic has impacted corporate governance:
1. Remote work: As a result of the pandemic, many companies have had to switch to remote work, which has created new problems for company administration. To ensure remote workers are productive while complying with company standards, boards and management teams have had to adapt to holding meetings virtually.
2. Cybersecurity: Cybersecurity has become a more pressing issue for businesses as remote work has increased. Executives must ensure their organizations have the essential security measures in place to protect themselves from online threats.
3. Risk management: The pandemic has made companies more vulnerable to new risks, such as B. Supply chain disruptions, financial volatility and concerns about the health and safety of their employees. To ensure their companies are prepared for these new risks, boards have had to review their risk management plans.
4. Stakeholder Engagement: The pandemic has brought to light stakeholder engagement - with customers, workers and communities. To address their concerns and maintain the trust of their stakeholders, companies had to improve how they communicated with them.
5. Financial reporting has become more difficult for companies due to the significant financial uncertainty of the pandemic. Companies are now required to disclose in more detail how the pandemic has affected their operations, financial results and cash flows.
Business ethics and corporate governance have always been essential components to ensure businesses thrive and last. These values guide the actions and decisions of the Company's officers, employees and stakeholders, which in turn affect the Company's performance, reputation and bottom line.
Businesses around the world are facing tremendous difficulties due to the COVID-19 epidemic and many are struggling to adapt to the changing market and economic conditions. The importance of business ethics and corporate governance has increased in this situation. To maintain stakeholder and public trust, companies have had to make painful decisions, such as: For example, making employees redundant or reducing compensation, and ensuring that these decisions are handled in a fair and ethical manner has been crucial.
The pandemic has also made it clear that businesses must prioritize the health and safety of their employees and customers, and the impact they have on the environment and society at large. Also, due to the pandemic, the trend toward remote working has intensified, creating additional difficulties for team management and promoting productive collaboration.
In summary, good corporate governance and ethical behavior are essential to any successful business, especially during difficult times like the COVID-19 pandemic. A company is more likely to effectively overcome the obstacles of the pandemic and emerge stronger in the long term when it prioritizes ethical decision-making, stakeholder engagement, and environmental and social responsibility.
Author 'Akshma Gupta'from the University of Petroleum & Energy Studies, pursuing BA.LLB (Corporate Hons.), 3rd year.