Maritz.R. CORPORATE GOVERNANCE IN SOUTH AFRICA.pdf

Corporate governance is related to strategy in

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are aligned, thereby setting the organisation on the road to sustainable success. Corporate governance is related to strategy in several ways: The organisational vision and mission should be reflected in its strategy – by doing so an organisation sets the scene for responsible business aims, practices and general conduct. Economic, social and environmental objectives have to be formulated as part of the organisational strategy – this ties in with a balanced view of profitability and performance. The execution of strategy should be monitored and controlled by management and the board of directors. The board should ensure that executives are appropriately penalised for failure or rewarded for success. Corporate governance and ethics in the international arena One critical element of governance in organisations is that of ethics. Recent moral lapses in international businesses such as Enron and WorldCom led to a new wave of government legislation (discussed below), which is geared towards holding Chief Executive Officers (CEOs) and Chief Financial Officers (CFOs) accountable for the actions of their colleagues and guarding ethical business practices. The realm of strategic management has traditionally been concerned with ethical principles and the cultivation of a certain level of integrity within the organisation. Ethical principles are ‘not subjective measures that vary with cultural, social, and economic conditions; they are objective statements that transcend countries, religions, and times. They are the basic rules of first principles that have been proposed to ensure a “good” society.’ 4 2 Carpenter and Sanders, 2009: 442 3 Carpenter and Sanders, 2009: 467 4 Hosmer, 1994: 20
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35 Reading 4 Corporate governance in South Africa Business ethics should be considered within the governance of an organisation, with specific focus on strategy; ranging from protecting shareholder wealth or developing governance systems, to sustaining environmental performance and social responsibility. 5 From a corporate governance perspective, one of the critical responsibilities of top management is to create and maintain a positive moral environment. Unfortunately corporate scandals seem to feature in the media all too often. Due to the collapse of some prominent European and American organisations, specific guidelines were needed to focus governance issues. The Cadbury Report 6 (Committee on the Financial Aspects of Corporate Governance) was published in December 1992 and the Financial Reporting Council study was published in June 1995. The Cadbury Report highlighted the desirability of corporate governance and argued for a clearly accepted division of responsibilities at the head of a company. The report stated this would ensure a balance of power and authority, such that no individual had unfettered powers of decision.
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