WHAT ARE THE KEY ELEMENTS OF EFFECTIVE CORPORATE GOVERNANCE?

DISCUSSION #1  WHAT ARE THE KEY ELEMENTS OF EFFECTIVE CORPORATE GOVERNANCE?
 RESPONSE # 1 –
For there to be effective corporate governance there are three key elements that the company must follow. These would be Transparency, Accountability, and Security which are critical for any company to be able to run effectively and efficiently. These elements are also needed in developing a professional relationship with a company’s employees, managers, directors, and shareholders. (Roman, 2020)
Transparency is key to effective corporate governance and demonstrates the company has nothing to hide. Transparency is critical for corporate governance as it ensures that the company’s actions are able to be checked by any outside observer. (Roman, 2020, para. 3) This allows the company’s processes and transactions to be verified and if any issues or questions arise it enables the company to provide a clear and accurate answer. (Eight Elements of Good Governance, n.d.)
Accountability is important that when any actions are taken that affect the company, those who enacted the change or enabled it should be documented. (Roman, 2020, Para. 7) It is necessary to document any changes and identify who is responsible as it provides answers if there are any inquiries or issues. The company is accountable for those that are affected by the decisions, even if everything goes smoothly. It ensures if there are any mishaps in the future that there will be accountability for the person or group that enabled the change. (Eight Elements of Good Governance, n.d.)
Security is the third key element. Similar to transparency which keeps a company’s process seen and accountability which holds its people to a higher standard, security helps to protect the companies data and keeps their employees and shareholders information private. There is no compromise for security. (Roman, 2020, Para. 14)  A company needs to be able to keep its corporate data, trade secrets, client information, etc. safe from any unauthorized access, either outside or inside the company. If the company has a security breach, especially if itis with client information, this could result in the loss of the trust of the public. For shareholders, trust is a major factor, it shows that they are able to make an investment and the company is going to protect their private information. (Eight Elements of Good Governance, n.d.)
References
Roman, A. (2020, March 18). The Three Pillars of Corporate Governance. Retrieved from Convene: https://www.azeusconvene.com/articles/three-pillars-of-corporate-governance
Eight Elements of Good Governance. (n.d.). Retrieved from Governance Pro: https://www.governancepro.com/news /
– ROBERT
DISCUSSION #1  WHAT ARE THE KEY ELEMENTS OF EFFECTIVE CORPORATE GOVERNANCE?
RESPONSE # 2-
Key elements of effective corporate governance include a board of directors that are active in the business and oversee a CEO’s actions as well as providing strategic guidance (Mastering Strategic Management, 2016, p. 320).  Along with that, effective corporate governance means boards that are playing many roles in the operation of a company including bringing awareness to laws that affect the company and representing the stakeholders who are tied to the long-term performance of the company (Mastering Strategic Management, 2016, p. 316). An effective board also eliminates and deals with the agency problem in which top management and other stakeholders may have a conflict of interest (Mastering Strategic Management, 2016, p.337). Effective corporate governance can be seen through strong corporate social performance by being committed to the individual people involved with the business, the communities and the environment (Mastering Strategic Management, 2016, p. 324). Strong corporate governance can also be seen in lower compensation for top management and board members (Mastering Strategic Management, 2016, p. 326). A key element of effective corporate governance is building an environment that deters illegal and scandalous actions by the company through strong corporate ethics and social responsibility (Mastering Strategic Management, 2016, p. 327). Effective corporate governance also means that managers and decision-makers are understanding of decision biases that arise from generational differences (Mastering Strategic Management, 2016, p. 336). Also, effective corporate governance will be seen by diversity among board members, CEO, and top management in a firm (Mastering Strategic Management, 2016, p. 325). Other elements of effective corporate governance are the equitable treatment of all stakeholders, boards that have the necessary skills to provide oversight and guidance to upper management, transparency to all of the stakeholders, and balanced interests of all vested interests (Albrecht, 2016, para. 3). Companies that have effective corporate governance are acting with the highest integrity and management is held accountable for their actions.
References
Mastering strategic management. (2016). Washington, DC: The Saylor Foundation.
Albrecht, S. (2016). Why Good Corporate Governance is So Important. Retrieved from https://wheatley.byu.edu/why-good-corporate-governance-is-so-important/
-MATTHEW
DISCUSSION #2 EXAMINE THE AFL-CIO EXECUTIVE PAYWATCH WEBSITE (HTTP://WWW.AFLCIO.ORG/CORPORATEWATCH/PAYWATCH) AND SELECT A COMPANY OF INTEREST TO SEE HOW MANY YEARS YOU WOULD NEED TO WORK TO EARN A YEAR’S PAY ENJOYED BY THE FIRM’S CEO.
RESPONSE #3
For this exercise, I chose a company whom I admire for their simplicity, ease of use and ‘feel good’ approach – Apple, Inc. I was alarmed to see that Tim Cook makes 283 times the amount of the average worker with $15,682,219 a year in salary and benefits. For me, with my current salary which has taken 16 years to earn, it would take me 136 years without inflation or salary adjustments to make what Mr. Cook makes in a year.
Now that being said, I fully understand and am aware of rationale for high-pay for CEOs and other c-level executives. Many of which is related to experience, performance and the need to retain talent (Mastering Strategic Management, 2012). This is perfectly illustrated in the text through Picasso’s portrait for a customer whereas the customer thought the price for the painting was high relatively to the actual time it took Picasso to perform the work (Mastering Strategic Management, 2012). While the moment in time to perform the actual work for that one piece was short-lived, it took Picasso his entire life to perform at such a high capacity, thus the cost is relative to the knowledge, experience and ultimately performance Picasso compiled over his life. This is a perfect example that relates to why CEOs have, and deserve higher paying salaries – their knowledge, experience and performance to lead successful companies, transforming culture, and executing the bottom-line.
-ALEX
DISCUSSION #2 EXAMINE THE AFL-CIO EXECUTIVE PAYWATCH WEBSITE (HTTP://WWW.AFLCIO.ORG/CORPORATEWATCH/PAYWATCH) AND SELECT A COMPANY OF INTEREST TO SEE HOW MANY YEARS YOU WOULD NEED TO WORK TO EARN A YEAR’S PAY ENJOYED BY THE FIRM’S CEO.
RESPONSE #4
The company I have chosen to review is Tesla which can be identified by its ticker TSLA. The CEO of Tesla, Elon Musk, had a staggering salary of $2,284,044,884 in the year 2018 (alfcio, pay watch, 2020). Based on my current income it would take me roughly 18,630 years to make that much money. This seems rather unethical to me largely because in the year 2018 Tesla had a net income of -$976 million, so his company lost nearly 1 billion dollars and yet he paid himself a massive salary (yahoo finance, TSLA cash flow, 2020). Personally, I am of the opinion that CEO’s should be primarily paid via stock options rather than a salary, this would tie their income directly to the performance of the company. This reminds me of our chapter for this week discussing how CEO’s may conduct certain actions such as buying a rival firm not because it’s necessarily better for the company but because it would result in the CEO making more money (The Saylor Foundation, 2014, chpt. 10, pg. 319).
Highest Paid CEO’s. (2020). Aflcio. Retrieved from https://aflcio.org/paywatch/highest-paid-ceos
Mastering Strategic Management. (2014). The Saylor Foundation. Retrieved from https://learn.umgc.edu/d2l/le/content/446273/viewContent/16880626/View
Tesla Financials. (2020). Yahoo Finance. Retrieved from https://finance.yahoo.com/quote/TSLA/cash-flow?p=TSLA
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