Corporate Governance

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Introduction

Corporate social responsibility is a hard decision to be taken by the company. Companies do not embrace CSR because it is a nice thing or because they are forced but because it is nice for their business. Companies should not be in business because of money but because of responsibility. They should consider about public good but not private greed. This is because it takes a long time to build a reputation but it takes five minutes to destroy the reputation. Therefore, CRS involves conducting businesses in an ethical way for the interests of the wider community and responding to the priorities of the societies and their expectations. Businesses should be able to balance the interests of the shareholders with the interest of the company and act ahead of regulatory confrontations.

The title CRS is a guide to a company’s missions and assist a company identify what it stands for and it will uphold to consumers. There is development of business ethics that guides a company to work within the stipulated laws. Philanthropy approach is common in companies that have embraced CSR since they give donations to local and nonprofit organizations in the community. This donations include social welfare, art education and health care. Another approach is to incorporate CRS directly to the strategies of an organization. For instance, procurement of fair trade tea and coffee by organizations into their business.

The Nestor Advisor is a company that gives advice on corporate governance, especially suggestions and ideas that will help non-financial companies from many regulations that will burden them. Their aim is to give views that will help the commission to come up with regulations that will meet the needs of non-financial corporations. Their main emphasis is on the board of directors and explanation of structure of the green paper.

Separation of the head of the panel and chief executive officer is the first issue addressed. The commission wants to know whether the responsibilities of the chairperson should be disintegrated from those of the head executive director. Duties of the chairperson must be defined clearly and there is no justification of separating chief executive officer roles from those of chairperson (Nestor Advisors, 2011). Separation of their duties is the best practice for the companies, especially in time of crises. Companies should use this strategy or any other that helps in flexible running of the company.

Board Composition

Professional diversity, international diversity, and gender diversity are discussed in relation to board composition. The commission wants to know the criteria to be used when employing workers. They want to know if the company should disclose whether it includes gender diversity, or it should be specific on the director’s profile.

Nestor advisors suggest that boards should have appropriate methods of the nomination process. Companies should be specific in recruiting board members, and they should have a proper channel of succession (Nestor Advisors, 2011).

They encourage board members to be from different areas; this will reduce the problem of blind spots, as opposed to those from the same area. Though they encourage board diversity, there are occasions when people from the same area perform better due to cohesiveness.

Risk management

The commission wants to know if the board should be responsible for the company’s risks and if they should disclose key issues. It is advantageous to disclose financial risks to stakeholders, but use of appropriate language is advised to avoid confusion and noise (Thomson Reuters, 2010). Boards should direct the companies on the amount of risk it is willing to undertake and the measures they will use to neutralize these risks.

Methods of governance

The freedom of a company should be in accordance with the provisions and be able to explain why it has left a certain practice benefits the company. This is workable in companies where the stakeholders are given active roles.

Statements that stipulate shareholders commitment in governance of the company according to the market should have meaning and be informative. This leaves the shareholder with the role of judging the governance of the company.

In spite of the EU considerations of making the explain approach flexible and market friendly, some improvements must be made. Monitoring groups can take the mandate of confirming that comply statement is complete and comprehensive.

There should be comply codes in certain markets to reduce exposure of governance deals. The EU has to provide comply codes for national markets, but the member states are supposed to choose the codes.

Board evaluation

It has been realized that regular external evaluation is beneficial to the company, not only in time of crisis, but also in opportune times. The board members get a chance to know their weak points and strong points through external evaluation. External evaluators can give valuable additional advised in relation to their areas of proficiency (Nestor Advisors, 2011).

Various businesses want to save by incorporating taxes but this depends whether these companies have corporate social responsibility. A company that is in Corporate social responsibility has the greatest advantage because it avoids double taxation. Corporate social responsibility has the disadvantage of being taxed at the individual and corporate level. Companies in Corporate social responsibilities are taxed from their business profits and shareholders have to pay additional money they take from the corporation including their dividends and bonuses. On the other hand, profits from the Corporation are given to the shareholders and later they pay taxes for these profits, which is similar to sole proprietorship taxing and partnership taxing. The Corporations do not pay any income taxes thus allowing the corporation to incorporate tax savings.

Conclusion

For a company to perform well, it should have a board of members from different domains. This will help them deal with different problems effortlessly. Companies are advised to be discrete and use understandable language when announcing their financial risks, mainly to avoid confusion from its shareholders. Regular external evaluation is recommended as it helps board members recognize their strong and weak points.

References

Nestor Advisors. (2011). EU Commission Green Paper: The EU Corporate Governance

framework.

Thomson Reuters. (2010). Special Corporate Governance: Building Better Boards. New York:

Thomson Reutors Accelus.

Thomson Reuters. (2010). Special Report: Corporate Governance: Building Better Roads.