Corporate Governance and Strategic Management
Corporate Governance and Strategic Management
Introduction
With the advent meltdown of major corporations in the last few decades, corporate governance and strategic management have become vital in reinstating the confidence of corporations. The notion of corporate governance has been in existence since the earliest times of social organization. However, it’s in the current business environment that most corporations in the world have begun adopting the waves of measures and regulations that prevent the corporations from scandals and facilitate the strategic running of the business. Despite the increased relevance of corporate governance in strategic management, many individuals in managerial positions have found it unclear about the concept of corporate governance. Effective corporate governance fosters strategic management, which generates value though innovation, entrepreneurialism, exploration, development as well as offering accountability.
Corporate governance entails the processes and structures that are used in the control and direction of companies (Shen and Gentry, 2014). To avoid mismanagement, companies have relied on effective corporate governance that is necessary for enabling the companies to operate more efficiently, mitigate risks, improve their capital access as well as safeguard their stakeholders. Ideally, the processes and structures directly highlight the various responsibilities and how the responsibilities should be filled in terms of directing decisions and company policy. For instance, executive management can prefer making decisions for their interests rather than the company’s or stakeholder’s interests. However, with the corporate governance, their company offers details on the process that the company will rely on to bring into line the desires of the executive board and the stakeholders to facilitate a workable compromise.
According to Mf Saltaji (2013), strategic management is an unrelenting process that entails attempts of fitting and matching an organization with its changing environment in the most effective way possible. Through strategic management, firms can cope with environmental uncertainties, expected performance, attain a competitive edge as well as maintain their long term goals and objectives. Corporate governance has been identified as one of the major strategic management tools that a company used to reach their expected performance, reduce uncertainties, as well as to attain a competitive advantage. This is because it is a structure that has been used to effectively manage and direct a business towards corporate accounting and enhanced prosperity.
Considerably, organizations constitute the recognized environment, which helps the firm in eliminating the uncertainty in their operations. The environment consists of the product and service producers, consumers, suppliers, and regulators. An organization has to adapt to the pressures that are brought about by the environment. However, organizations that fail to adapt to the environment are rejected by the environment in which they exist, and therefore, they fail to survive.
Organizations, therefore, have to maximize the support of the environment to increase their survival by combining the rational elements within the environment. Since organizations deal with several social problems, there is a need to define their procedures and rules to reach their specific goals and objectives (Shen and Gentry, 2014). Thus, corporate governance assures that the corporation reaches its goals and objectives through well-defined rules and procedures that are used to control and manage the company. The corporate governance framework ensures that the decisions and policies that control and manage the business are made ethically and facilitate ethical business operations.
Corporate governance is a significant part of strategic running that can increase the performance of an organization (Mf Saltaji, 2013). This is because the corporate governance framework will filter the organization’s culture and strengthen it. For instance, an increase in awareness about significant regulations will lead to effective performance. Relatively, this also improves and builds a transparent process in the day to day operations of the business.
Corporate governance holds an essential role in the strategic control of a firm. For instance, the Apple Board of directors is mandated to supervise the CEO as well as other senior management to ensure the ethical and competent operation of the day to day business at Apple (Mohapatra, 2016). Apple’s corporate governance structure has been an effective system which facilitated strategic planning of practices, rules, and process through which the company is controlled and directed. Essentially, this has involved the capacity to balance between the interests of the government, the stakeholders, customers, management, financiers, suppliers, and the entire community. To gratify the responsibilities of the board, the managers have been expected to have a dedicated and proactive tactic to set company standards. This has been effective in ensuring that Apple remains committed to business success and effective management of all stakeholder’s interests through a high standard of ethics and responsibility.
Considerably, corporate governance involves the processes through which the company objectives are pursued in the set of regulatory, social, and market atmosphere. Apple’s corporate governance has encompassed all the spheres of management from internal and action plans to corporate disclosure and performance measurement (Mohapatra, 2016). For instance, their board of directors is a significant element in the corporate governance mechanisms for the company’s strategic management. This is because of the boards an essential position in overseeing the implementation of the organization activities. Therefore, Apple has to ensure that they have a strong board of directors who facilitate effective management.
The ultimate aim of corporate governance is to achieve the greatest control and harmony in business. Through a high level of governance, the firm performs effectively in a controlled environment (Fooladi and Nikzad Chaleshtori, 2011). This is because the company has a system of corporate governance that has been put in place, dictating the direction to which the business will run. Corporate governance fosters relations that exist between the management and other stakeholders. Therefore, it enables the company to maintain an effective relationship with its stakeholders, fostering successful outcomes.
Corporate governance entails determining ways through which an effective and strategic decision can be made. This is because it offers the ultimate responsibility and complete authority to the management. Corporate governance ensures that there is transparency and that there is a balanced and strong economic development (Gnan et al., 2013). Considerably, the corporate governance offers techniques and strategies through which the company is directed. This means that the company will carry the operations with regard to the desires of different stakeholders.
The strategic planning of an organization is derived from the guidelines and objectives of the corporate governance framework (Gnan et al., 2013). This is because corporate governance offers guidelines on the procedures of the business operation. Therefore, it becomes more accountable as well as responds to the concerns of social development and sustainable development. Relatively, the corporate governance framework has several features that facilitate its effectiveness in strategic management. For instance, its corporate governance structure has a clear reporting line and divided responsibility. It ensures that the board has a great diversity in terms of the director’s experience, skills, age, and gender. Through the corporate governance structure, an organization can formulate internal controls that include transparent procedures and active risk management procedures.
The corporate governance system has enabled the management to design procedures that balance the profitability and sustainability of the business. This is because the management has offered accountability to various stakeholders through the corporate governance structure. For instance, the organization can strategically manage its relationship and recognize the external stakeholders who include the suppliers, customers, vendors, as well as the community. The board of directors has to ensure that they have a risk management strategy, corporate strategy, and maintain ethical business practices.
Considerably, ineffective corporate governance can have financial health implications on an organization since it leads to doubt on the company’s integrity, obligation, and reliability (Fooladi and Nikzad Chaleshtori, 2011). Ineffective corporate governance decisions can destroy the success that Apple has been building over the years. For instance, a poorly structured board may lead to challenges in effective incumbents for shareholders. Poor corporate governance is due to a lack of efficient and prudential supervision. This can lead to the financial crisis and the poor economic performance of a firm.
Conclusion
In Conclusion, organizations have to be strategically planned, managed, controlled, and give accounts of their operations. Corporate governance entails a set of in-house policies and guidelines that govern how the company is managed and controlled. The corporate governance selects the strategic resolutions that can be evaluated by the directors and managers to ensure that the operations of the business are in line with the interests of all stakeholders. The corporate governance framework offers a strategic objective for the company and ensures that the strategic decisions of the company are made in the interest of the stakeholders.
References
Fooladi, M., & Nikzad Chaleshtori, G. (2011, June). Corporate governance and firm performance. In International Conference on Sociality and Economics Development (ICSED 2011), Kuala Lumpur, Malaysia, June (pp. 17-19).
Gnan, L., Hinna, A., Monteduro, F., & Scarozza, D. (2013). Corporate governance and management practices: stakeholder involvement, quality, and sustainability tools adoption. Journal of Management & Governance, 17(4), 907-937.
Mf Saltaji, I. (2013). Corporate Governance Relationship with Strategic Management. Internal Auditing & Risk Management, 8(2).
Mohapatra, S. (2016). Case studies in business ethics and corporate governance. Pearson Education, India.
Shen, W., & Gentry, R. J. (2014). A cyclical view of the relationship between corporate governance and strategic management. Journal of Management & Governance, 18(4), 959-973.