REPORT ON

CORPORATE GOVERNANCE
 INTRODUCTION AND OVERVIEW
 CORPORATE REPUTATION
 CORPORATE LEGITIMACY
 CORPORATE CRIME

HIMANI
BE CHEM WITH MBA 5TH YEAR
CM14216
DR. SSBUICET, PANJAB UNIVERSITY
INTRODUCTION
Corporate Governance is an increasingly significant aspect of business and
organisational management, extending to international politics and trade laws; and to
globalised economics, corporations and organisations, and markets.

Theories, standards and regulations relating to Corporate Governance began to

develop properly in the 1990s, so it is a relatively recent field of economic and
management practice.

OVERVIEW
Corporate Governance is basically a detailed disclosure of information and an
account of an organization’s financial situation, performance, ownership and
governance, relationship with shareholders and commitment to business
ethics and values.

A corporation is created to address objectives which are much more than creating
products and services, it has to serve the larger purpose of satisfying multilevel
needs of the society. Healthy corporate governance practices are no longer the need
of the law but have become essential for the very survival of the organizations, the
current economic crisis has proven that beyond doubts.

The corporations have always faced the tug of war of protecting the interests of the
shareholders (the legal owners) or the stakeholders which includes suppliers,
creditors, government and communities.

Center of European Policy Studies or CEPS defines corporate governance as the

whole system of rights, processes and controls established internally and
externally over the management of the business entity with the objective of
protecting the interests of the stakeholders.

OECD defines corporate governance as Corporate Governance is the system

by which business corporations are directed and controlled.  The corporate
governance structure specifies the distribution of rights and responsibilities among
different participants of the corporation such as the board, managers, shareholders
and other stakeholders, and spells out the rules and procedures for making
decisions on corporate affairs. By doing this, it also provides the structure through
which the company objectives are set, and the means of attaining those objectives
and monitoring performance.

CORPORATE GOVERNANCE CORE PRINCIPLES

Fairness

Fairness refers to equal treatment, for example, all shareholders should receive
equal consideration for whatever shareholdings they hold. In the UK this is protected
by the Companies Act 2006 (CA 06). However, some companies prefer to have a
shareholder agreement, which can include more extensive and effective minority
protection. In addition to shareholders, there should also be fairness in the treatment
of all stakeholders including employees, communities and public officials. The fairer
the entity appears to stakeholders, the more likely it is that it can survive the
pressure of interested parties.

Accountability

Corporate accountability refers to the obligation and responsibility to give an

explanation or reason for the company’s actions and conduct. In brief: The board
should present a balanced and understandable assessment of the company’s
position and prospects; The board is responsible for determining the nature and
extent of the significant risks it is willing to take; The board should maintain sound
risk management and internal control systems; The board should establish formal
and transparent arrangements for corporate reporting and risk management and for
maintaining an appropriate relationship with the company’s auditor, and The board
should communicate with stakeholders at regular intervals, a fair, balanced and
understandable assessment of how the company is achieving its business purpose.

Responsibility

The Board of Directors are given authority to act on behalf of the company. They
should therefore accept full responsibility for the powers that it is given and the
authority that it exercises. The Board of Directors are responsible for overseeing the
management of the business, affairs of the company, appointing the chief executive
and monitoring the performance of the company. In doing so, it is required to act in
the best interests of the company.

Transparency

A principle of good governance is that stakeholders should be informed about the

company’s activities, what it plans to do in the future and any risks involved in its
business strategies. Transparency means openness, a willingness by the company
to provide clear information to shareholders and other stakeholders. For example,
transparency refers to the openness and willingness to disclose financial
performance figures which are truthful and accurate. Disclosure of material matters
concerning the organisation’s performance and activities should be timely and
accurate to ensure that all investors have access to clear, factual information which
accurately reflects the financial, social and environmental position of the
organisation. Organisations should clarify and make publicly known the roles and
responsibilities of the board and management to provide shareholders with a level of
accountability. Transparency ensures that stakeholders can have confidence in the
decision-making and management processes of a company.

EXAMPLE

The Coca-Cola Company is committed to good corporate governance, which

promotes the long-term interests of shareowners, strengthens Board and
management accountability and helps build public trust in the Company.

The Board is elected by the shareowners to oversee their interest in the long-term
health and the overall success of the business and its financial strength. The Board
serves as the ultimate decision making body of the Company, except for those
matters reserved to or shared with the shareowners. The Board selects and
oversees the members of senior management, who are charged by the Board with
conducting the business of the Company.

The Board of Directors has established Corporate Governance Guidelines which

provide a framework for the effective governance of the Company. The guidelines
address matters such as the Board’s mission, Director responsibilities, Director
qualifications, determination of Director independence, Board committee structure,
Chief Executive Officer performance evaluation and management succession. The
Board regularly reviews developments in corporate governance and updates the
Corporate Governance Guidelines and other governance materials as it deems
necessary and appropriate.

The Company’s corporate governance materials, including the Corporate

Governance Guidelines, the Company’s Certificate of Incorporation and Bylaws, the
charters for each Board committee, the Company’s Codes of Business Conduct,
information about how to report concerns about the Company and the Company’s
public policy engagement and political contributions policy, can be accessed by
clicking on the links above.
 CORPORATE REPUTATION
Corporate reputation is the collective beliefs or opinions that communities,
customers, employees, partners and regulators hold about an organization.
Reputation is used to describe ideas as opposed to visual symbols and emotional
impressions that are also part of a firm's corporate identity.

Corporate reputation refers to people’s collective opinion regarding a corporation or

enterprise. It’s based on such features such as search engine results, news
coverage, and the publicized actions of the company.
And, man, are there some corporate reputation humdingers out there. The news
media loves a sizzling story of a corporation’s fall from grace and with good reason.
The public is receptive. The human brain seems wired to generate copious amounts
of curiosity when the topic is salacious or negative.
Every corporation should give a care about its reputation. That’s why corporate
reputation is such a hot topic. And instead of just working to fix a broken reputation
or juice more sales from a particularly good reputation, it pays to understand how
corporate reputation works in the first place.
By the time you finish reading this article, you’ll be in the know when it comes to
corporate reputation. And, more importantly, you’ll understand what goes into a good
corporate reputation.

Corporate reputation is an intangible asset

Any discussion of corporate reputation must deal with that jargony

phrase intangible asset. Opaque though it might be, the intangible asset
aspect of a corporation’s reputation is a necessary first place to start.
In corporate terms, what is an asset? It’s anything of value owned by a
company. Most of the time we think of assets in terms of a corporation’s
land, buildings, inventory, or cash. These are tangible and quantifiable
— something that is relatively easy to look at on a spreadsheet or even
physically touch.
What, then, is an intangible asset? It’s anything of value owned by a
company that doesn’t have a physical correlate.
Some of the most recognized intangible assets are things like patents or
copyrights. They obviously have value, but not the kind of value that you
can place a number on.
Into this nebulous category, we place corporate reputation. It’s an asset,
yes, and can be of immense value. But it’s not something that gets a line
item or is tallied up at the end of the fiscal year. It’s intangible.
Since it is intangible, corporate reputation is easy to neglect. Even more
serious, when this asset is in jeopardy, its owners may not know how to
protect it or repair it.
In The Conglomerate, a journal on business law and economics, one
writer makes the point that “The quality of a firm’s choices and outcomes
are one driver of reputation, but reputation also has a life of its own.”
This life of its own accurately describes the risks and rewards of
corporate reputation.
But there are upsides as well, at least for corporations with a good
reputation. This good reputation as an asset, is one that’s very difficult
for competitors to steal or to replicate. The authors of an academic paper
in the International Journal of Business and Social Science make this
point: “Good corporate reputations are critical not only because of their
potential for value creation, but also because their intangible character
makes replication by competing firms considerably more difficult.”
Admitting its unwieldy nature, both advantages and disadvantages, is
the first step towards taking effective action in terms of reputation
management. But in order to manage a corporate reputation, you need
to understand something very important — your reputation stakeholders.

Corporate reputation has stakeholders

Stakeholders are the people who have any level of interest or concern in
the corporation. That can be a pretty broad and diverse group of people.
What’s important here is to understand who those stakeholders are and
how they see the brand.

Who are these stakeholders?

There are two broad groups of stakeholders — those who are within the
company and those who are without the company. Each stakeholder or
group of stakeholders has a particular angle of interest which affects
how they view and react to the corporate reputation.
Here are some of the stakeholders within the company, along with their
particular angle of interest:
  CEO – Wants to save face or maintain control
 Employees – Want to hang on to their job, get promoted, be
respected by friends and colleagues
 Board members – Want the company stock price to increase
 Attorney – Wants to protect the company legally

Who are the stakeholders who are outside the company?

 Vendors – Want the company to maintain their contract and benefit

from their success
 Prospective employees – Want to work at a company that offers
growth, stability, and has a good reputation
 Customers – Want to get value, not get ripped off, work with a
company that has a good reputation
 Investors – Want the company to grow and the stock price to
increase
 General public – They’re just curious. If the company is large or if
the reputation is in midst of a scandal, their curiosity will increase

Each of these stakeholders (and there are more than just these) view the
company in different ways because they have different interests.
EXAMPLE OF NEGATIVE CORPORATE REPUTATION
Remember Uber in 2017? We heard a lot of negative news about them.
Like this: According to Business Insider, Uber fired more than 20
employees on June 6, 2017 after 215 claims of sexual harassment were
uncovered during after a workplace investigation. Uber’s investors
demanded that Travis Kalanick, the company’s CEO, resign later that
same month. This type of news is obviously not good for Uber’s brand
reputation. Former drivers and passengers of Uber have been opting
instead for Uber’s rival, Lyft, in the last year. Fortune reported in July
2017 that Uber’s share of the ride-sharing market declined to 75 percent
from 90 percent. Wired reported in June 2017 that Lyft was expanding
services and getting new partners and investors, all while Uber’s
reputation took a negative turn. In December 2017, Lyft announced its
most recent round of funding increased to $1.5 billion, up from the
original $1 billion. Uber is still doing well, according to the Motley Fool.
Lyft still has a lot of work to do to catch up, but the company was able to
jump ahead while Uber’s brand reputation sank low. Uber is now a
company that people love to hate.
EXAMPLE OF POSITIVE CORPORATE REPUTATION
Microsoft is a great example of a company with a positive corporate
reputation. Microsoft’s employee empowerment culture and philanthropy
initiatives have put the company in a positive light in recent years. In
2015, Microsoft announced the launch of Microsoft Philanthropies to
expand its commitment to corporate philanthropy around the world. As
an example, let’s take a look at Microsoft’s employee giving program.
Microsoft matches employee donations to nonprofit organizations in both
money and time. This program motivates employees and keeps them
engaged in the company. Microsoft is committed to its mission:
“Empower every person and every organization on the planet to achieve
more.”
Corporate legitimacy
Corporate legitimacy is the acceptance, desirability, and appropriateness
that the people determine a company is worthy of. The judgment of the
people is based on the goals that the company has set and the
likelihood that they can be achieved.
In his famous book Economics of Love and Fear, Kenneth Boulding
suggests that business is a peaceful alternative to war (Boulding, K.
1973). This might be true in principle, but today business seems to be at
war with society and nature. Striving for profit and competitiveness,
mainstream businesses produce monetary results at the expense of
nature, society and future generations. In his influential book When
Corporations Rule the World, social critic David Korten argues that
today's global economy has become like a malignant cancer, advancing
the colonization of the planet's living spaces for the benefit of powerful
corporations and financial institutions. It has turned these once useful
institutions into instruments of a market tyranny that is destroying
livelihoods, displacing people, and feeding on life in an insatiable quest
for money. It forces us all to act in ways destructive of ourselves, our
families, our communities, and nature (Korten, D. 1995). Conventional
legitimizing arguments for business do not work anymore. Referring to
efficiency or job creation is not enough for stakeholders who are angry
with corporate bosses and their insensitive policies. New arguments and
performances are needed for corporations to gain legitimacy in the 21st
century. "
2 Just War Theory
I suggest that the Just War theory provides an excellent methodological
device for determining the conditions of legitimacy of companies. The
Just War theory promotes the view that a specific war is just if
satisfactory conditions are met. The Just War tradition addresses the
morality of the use of force in two parts: when it is right to resort to
armed force (the concern of “jus ad bellum”) and what is acceptable in
using such force (the concern of “jus in bello”). In more recent years, a
third category — “jus post bellum” — has been added, which governs
the justice of war termination and peace agreements, as well as the
trying of war criminals. Just War Theory has different sets of criteria. The
first establishes the right to go to war (“jus as bellum”); the second
establishes the right conduct within war (“jus in bello”), while the third
establishes justice concerning the results of war (“jus post bellum”). In
business ethics we can make analogous distinctions. A company activity
system can be considered morally justifiable if the company’s activities
are substantively right, procedurally fair, and bring justice to the
company's ecosystem. 3 Substantively Right Being substantively right
implies that the company activity system is ecological, future respecting
and prosocial (Zsolnai, L. 2009). This means that
(i) the company activity system does not harm nature or
allow others to come to harm;
(ii) the company activity system does not violate the interests
of future generations;
(iii) the company activity system serves to enable people.
3. Not Harming Nature
From the perspective nature integrity is a central value. The notion of
ecological integrity was introduced by American environmentalist Aldo
Leopold in his classic A Sand County Almanac. He writes, “[A] thing is
right when it tends to preserve the integrity, stability, and beauty of the
biotic community. It is wrong when it tends otherwise” (Leopold, A.
1948). Company activity systems might be evaluated against
environmental indicators that operationalise the notion of ecological
integrity.
EXAMPLE
In recent times we have seen a succession of enquiries and
recommendations : The Cadbury enquiry in 1992 into Financial Aspects
of Corporate Governance, followed by the Hampel Report (1998) and
Turnbull Report (1998). While investor confidence always seems to
return public trust remains low, despite the many legislative remedies of
the last few decades. A 1976 survey (The Harris Survey) of public trust
in major US institutions showed a drop of public confidence in major
companies from 55% in 1966 to 16% in 1976. A similar survey
conducted in 2002 (The Golin/Harris Survey) showed that public
confidence in US corporations was still significantly low down a ranking
list, based on a survey where almost 70% of people said they did not
trust corporations today. These instances of wrong-doing, legal moves
and social attitudes suggest that the legitimacy of the body corporate is
under threat. As Mason (1959) observed more than 40 years ago and
Sutton (1993) has more recently re-stated, who selected these men, if
not to rule over us, at least to exercise vast authority, and to whom are
they responsible? The answer to the first question is quite clearly: they
selected themselves. The answer to the second is, at best, nebulous.
This, in a nutshell, constitutes the problem of legitimacy.
CORPORATE CRIME
Corporate crime, also called organizational crime, type of white-
collar crime committed by individuals within
their legitimate occupations, for the benefit of their employing
organization. Such individuals generally do not think of themselves
as criminals, nor do they consider their activities criminal. Related to
corporate crime is professional white-collar crime, which is crime
committed by those who identify with crime and make crime their
sole livelihood.
The Concept of Corporate Crime
The origins of the concept of corporate crime can be traced to the larger
concept of white-collar crime, which was first introduced in the social
sciences by American criminologist Edwin Sutherland in a 1939
presidential address to the American Sociological Association. He
defined white-collar crime as “a crime committed by a person of
respectability and high social status in the course of his occupation.”
Focusing on the powerful as well as the downcast, such a concept
represented a radical reorientation in theoretical views of the nature of
criminality. Sutherland later published a book titled White Collar
Crime (1949), which concentrated almost exclusively on corporate crime.
Using official records of regulatory agencies, courts, and commissions,
he found that all 70 of the corporations that he examined over a 40-year
period had violated at least one law or had an adverse decision issued
against it for false advertising, patent abuse, wartime trade violations,
price-fixing, fraud, or intended manufacturing and sale of faulty goods.
Many were recidivists (repeaters) with an average of eight negative
decisions issued for each. Sutherland noted that while “crime in the
streets” captured the newspaper headlines, “crime in the suites”
continued unnoticed. While white-collar crime was far more costly than
street crime, most cases were not even covered under criminal law but
were treated as civil or administrative violations.
Example:- Astrazeneca to Pay $68.5 to Settle Anti-Psychotic Drug
Case

AstraZeneca Plc (AZN) agreed to pay $68.5 million to 37 U.S. states and
the District of Columbia to resolve allegations that the company
deceptively marketed its anti-psychotic drug Seroquel.
The settlement, announced today, is separate from a $520 million
agreement London-based AstraZeneca reached with the U.S. last year
over the marketing of Seroquel, said Tony Jewell, a company
spokesman.
The company marketed Seroquel for uses that weren’t approved by the
U.S. Food and Drug Administration, the federal and state governments
claimed. 
AstraZeneca promoted the drug, approved for schizophrenia and bipolar
disorder, for dementia, depression and anxiety in violation of federal
drug rules, according to the states.
While doctors can prescribe medicines for other diseases, companies
aren’t allowed to market drugs beyond approved uses.
REFERENCES
a. https://www.managementstudyguide.com/corporate-governance-overview.htm
b. https://www.businessballs.com/organisational-culture/introduction-to-corporate-
governance/
c. https://www.coca-colacompany.com/investors/corporate-governance
d. https://simplicable.com/new/corporate-reputation
e. https://www.business2community.com/public-relations/corporate-reputation-
what-how-and-why-02091720
f. https://www.pearse-trust.ie/blog/bid/108866/the-core-principles-of-good-
corporate-governance
g. https://www.answers.com/Q/Define_corporate_legitimacy
h. http://laszlo-zsolnai.net/sites/default/files/3/documents/Zsolnai%20Corporate
%20Ligitimacy.pdf
i. https://www.britannica.com/topic/corporate-crime
j. https://www.alzheimersreadingroom.com/2011/03/astrazeneca-to-pay-685-million-
to-us.html