In recent years, Corporate Social Responsibility (CSR) and Corporate Governance has been widely explored with a number of reports and codes of practice aimed at decreasing instances of what are seen as grossly unethical ways of managing major organizations. Quite apart from the strictures of moral theory, there is considerable danger to the reputation of quoted companies if shareholders feel that they do not believe the information presented to them by company directors and senior executives. Any general lack of confidence in the financial probity of companies could be very damaging to the economic system as a whole. If entrepreneurs and senior managers want unjustified large salary instead of paying attention to the wishes of shareholders, then conflict happened (Harrison, 2005). Thus, the developments of the Corporate Governance Codes like Cadbury Report, OECD principles, Sarbanes-Oxley Act etc have been driven by financial scandal, corporate collapse, or similar crisis. CSR has developed the idea of corporate governance in order to encourage management to take broader ethical considerations into their account. The introduction of corporate governance codes has been motivated by a desire for more transparency and accountability, and a desire to increase investor’s confidence in the stock market as a whole (Mallin, 2007). This essay presents a critical discussion of the OECD Principles and the Sarbanes-Oxley Act for corporate governance within the context of high profile businesses. Later, it will present the significant differences in focus and intend between OECD and Sarbanes-Oxley. Moreover, it will critically discuss the convergence of Corporate Governance and Corporate Social Responsibility (CSR).
Table of Contents
1. Introduction
2. Corporate Governance
3. The OECD Principles of corporate governance
4. The Sarbanes-Oxley Act of corporate governance
5. Discussion and evaluation of the OECD Principles and the Sarbanes-Oxley Act within the context of high-profile businesses
6. The significant Differences in focus and intend between OECD and Sarbanes-Oxley
7. Cadbury report
8. Greenbury Report
9. Corporate Social Responsibility(CSR)
10. The convergence of corporate governance and corporate social responsibility
11. Conclusion
Objective and Key Themes
This assignment aims to provide a critical discussion of the OECD Principles and the Sarbanes-Oxley Act regarding corporate governance within the context of high-profile businesses, while examining the convergence of these frameworks with Corporate Social Responsibility (CSR).
- Corporate governance standards and their evolution post-financial crises.
- Comparative analysis of the OECD Principles and the Sarbanes-Oxley Act.
- The role of transparency, accountability, and internal control in preventing corporate collapses.
- The conceptual framework of CSR and its multi-layered responsibilities.
- The strategic convergence between corporate governance programs and CSR initiatives.
Excerpt from the Publication
Discussion and evaluation of the OECD Principles and the Sarbanes-Oxley Act within the context of high-profile businesses:
Due to the lack of effective corporate governance practices, a number of high-profile corporate collapses have arisen. Now, we are going to discuss some of the high profile corporate collapses.
Baring Bank is one of England’s oldest established banks was collapsed during 1995 and was eventually bought by £1 by ING, the Dutch Banking and insurance group. This downfall brought by the action of one man, Nick Leeson, who is a clever trader with a gift for sensing the way, that the stock market prices would move in the far eastern markets. He was able to make a profit that was 10 percent of Barings’ total profit during 1993. Later, He incurred huge losses of Barings’ money due to earth quake in the Japan. Then, he requested more funds from Barings’ head office in London, which were sent to him and he incurred more losses after sending that money. The losses were £ 850 million which lead Baring Bank to collapse. (Mallin, 2007) If we evaluate the situation of Baring Bank, then we find that it was lacking effective internal control at that time. Therefore, the collapse of Barings Bank sent waves throughout financial markets across the world as the consequence of effective internal controls and appropriate monitoring was reinforced.
Summary of Chapters
1. Introduction: Outlines the rise of corporate governance and CSR as essential tools to restore shareholder confidence following financial scandals.
2. Corporate Governance: Defines corporate governance as the system of relationships and monitoring mechanisms between shareholders, the board, and management.
3. The OECD Principles of corporate governance: Details the non-binding guidelines developed by the OECD to promote high standards of audit, accounting, and board self-governance.
4. The Sarbanes-Oxley Act of corporate governance: Discusses the US legislation aimed at regulating corporate conduct, focusing on financial reporting accuracy and CEO/CFO certification.
5. Discussion and evaluation of the OECD Principles and the Sarbanes-Oxley Act within the context of high-profile businesses: Analyzes the failures of companies like Baring Bank, Enron, and Royal Ahold to illustrate the necessity of these governance frameworks.
6. The significant Differences in focus and intend between OECD and Sarbanes-Oxley: Compares the two frameworks, highlighting that SOX is mandatory legislation while OECD principles are voluntary and holistic.
7. Cadbury report: Summarizes the 1992 report's impact on board structure, specifically regarding the separation of chairman and CEO roles.
8. Greenbury Report: Reviews recommendations concerning the transparency and disclosure of director remuneration packages.
9. Corporate Social Responsibility(CSR): Explores the four layers of CSR—economic, legal, ethical, and philanthropic—using Carroll’s pyramid model.
10. The convergence of corporate governance and corporate social responsibility: Examines how the shift towards stakeholder theory integrates governance and CSR into long-term business sustainability.
11. Conclusion: Summarizes that effective corporate governance and CSR are critical to preventing future scandals and maintaining market integrity during financial crises.
Keywords
Corporate Governance, Corporate Social Responsibility, CSR, OECD Principles, Sarbanes-Oxley Act, SOX, Stakeholder Theory, Financial Scandal, Transparency, Accountability, Board of Directors, Shareholder Value, Enron, Internal Control, Business Ethics.
Frequently Asked Questions
What is the core focus of this assignment?
The work primarily addresses the evolution and necessity of corporate governance codes and CSR in the wake of major corporate financial scandals and collapses.
What are the primary thematic areas explored?
The central themes include the comparison of OECD Principles and the Sarbanes-Oxley Act, the definition of CSR through the pyramid model, and the strategic convergence of these disciplines.
What is the main objective of the research?
The objective is to critically discuss how specific corporate governance frameworks are applied in high-profile businesses to ensure transparency and ethical accountability.
Which methodology is employed in this study?
The assignment uses a descriptive and comparative methodology, evaluating secondary literature and reports to analyze the impact of governance codes on organizational behavior.
What topics are covered in the main body of the text?
The main body covers definitions of governance, specific case studies of corporate failure, detailed comparisons of regulatory frameworks (OECD vs. SOX), and an exploration of CSR responsibilities.
Which keywords best describe this paper?
Key terms include Corporate Governance, CSR, OECD Principles, Sarbanes-Oxley, Stakeholder Theory, and Accountability.
How does the Sarbanes-Oxley Act differ from the OECD Principles?
The Sarbanes-Oxley Act is mandatory legislation focused on financial reporting and internal controls in the US, whereas the OECD Principles are voluntary guidelines meant to improve the broader regulatory framework globally.
Why are case studies like Enron or Baring Bank mentioned?
These examples illustrate the devastating consequences of lacking effective internal controls and ethical management, serving as evidence for why stricter governance codes were developed.
What is the "enlightened self-interest" concept in the context of CSR?
It refers to the idea that businesses manage their relationships with stakeholders not just for altruism, but because doing so is in the organization’s long-term interest and helps ensure its survival.
- Quote paper
- PhD Candidate, MBA, BBA Md. Rajibul Hasan (Author), 2011, OECD Principles, Sarbanes-Oxley legislation and CSR, Munich, GRIN Verlag, https://www.grin.com/document/208274
