CORPORATE GOVERNANCE'

There are multiple factors incorporated that successfully control and run the successful corporate governance module and functioning of an economic/business enterprise, e.g., company, firm, or any of such type simple/complex structured organizations working within the ambit of corporate law while protecting the rights of its employees, shareholders, customers, investors, management and other stakeholders and at the same time develops a pattern that ensures healthy business profit-making, transparency, openness, accessibility to scrutiny and consequently winning investors' trust and drawing more investors to invest into the businesses of the corporation and contribute to the value building of the shares prices.

  Be it private or public, or a statutory body, a company or organizational entity is a legal fiction.  It is a person defined as such by law.  Once formed, a company becomes a corporate citizen and enjoys independent existence from its owners.  Persons who direct and govern a company's business are called directors and are generally elected by its owners, called shareholders for private and public companies. 

Over the years, the analytical study on the causation effects of best functioning of more significant and recognized capital markets resided in the developed world has been done to deduce some forward-looking theoretical results which could describe the essentials for the efficient working and optimum profit yield of any corporation and the role of law and legislation to provide the security umbrella and risk visualization(the systematic use of graphics such as interactive charts, visual metaphors and mapping techniques to augment the quality of risk communication along the entire risk management cycle)to manage the risk factor for the shareholders and the investors many other contributory factors such as the cultural, political, social, religious and ethnographic which have a significant role to play in the growth of any corporation or company. 

These studies mainly ignore the cross-country emerging markets in the developing world and the micro-level details.

 Emerging markets present a better overview of the situation because of the bigger sample size than the solid legal frameworks and implementation of a law that indicates corporations' success and failures. The need to gather data from the emerging markets and the cofactors that demonstrate corporations' performance on the corporate governance index and a better-detailed study at the micro-level of the firm to give a more profound and more precise picture of the entire situation. 

Many firms and companies residing in the less developed countries and dealing with the less friendly business environment and stability required for the growth of businesses, but those enterprises still showed much better output yield, unlike their business counterparts working in a similar setup. Why is that? 

This trend asserted the importance of the micro-level study, more like studying at the firm level, to answer why those enterprises had better business gains. The research and survey-making organizations are keen on working on that phenomenon to give investors a better picture of the things Tuli invest and gain profits out of their investments to analyze precisely why the premium is performing companies. For that purpose, the more convenient approach is to analyze the performances at the micro-level of firms. The results showed some possible answers that might have been the cause. The company's direct access to the international markets could be vital for setting such high standards and best work ethics to become such a successful company. 

STRONG LAWS:

The strength of solid laws and their execution gives a sense of protection to the shareholders, investors. It forms a solid foundation and friendly, comfortable environment for the ideal working of any corporation. Suppose two companies are domiciled in two different countries facing similar downtrend and losses. It still then gives the company a cushion with a better law framework and legal checks to recover and manage the losses. To provide some financial security to the different ingredients working in that entity thus asserts the importance of laws for the smooth sailing of any entity business entity.

Parallel to laws, another thing that makes the company grow faster and achieve more as a profit-making successful entity is the bar of good clean practices, which they set for themselves besides the minimal mandatory law support. Good companies with healthy culture always make sure that they're a step ahead of their competitors. Through these codes, they transform their entity into a more professional enterprise, and as a consequence of that, it promotes a healthy environment within the corporation. 

The government-sponsored enterprises (GSEs) are a group of financial services corporations that the United States Congress has created in the USA. 

A micro-enterprise is defined as a business having 5 or fewer employees and low seed capital.

Be it public or private enterprise, the key factors to win investors' trust and win a good name for the company remain the same.

• Transparency
• Access To Information
• Independence
• Work Ethics
• Independent Auditors
• Skilled Dedicated Board Members
• Moral Practices
• Media Accessibility To The Internal Working
• Protection Of The Assets
• Optimum Use Of The Investment.
• Consensual Decision Making
• Fairness
• Audit Report Sharing
• Strong Legal Structure 
• Stable Political Environment 
• Responsibility 
• Good Board Practices 
• Accountability 

TRANSPARENCY:

Transparency is the key when it comes to building a good reputation for your business entity. According to the international standards in place, sharing all about the business information, company's working, and profit-making in your financial report gives everyone easy access to the company's financial status. In the past, corrupt practices and sharing of wrong and misleading financial statements have caused the downfall and deterioration of so many companies. It is essential to have a proper system of checks and balances to build investors' trust in your company.

MEDIA ACCESSIBILITY:

Media in this day and age can play a vital role in promoting/marketing and winning trust for your enterprise. If not biased and work with an objective approach without any obvious prejudices, media can be an excellent medium to market.

SKILLED DEDICATED BOARD MEMBERS:

The duties of board members are of utmost importance. Management is answerable to the board members, and board members are accountable to the shareholders. The day-to-day working of the corporation, assigning duties, making strategies, overseeing the managerial functions. A director should have the skills, right approach, and responsibility to protect the company's assets. He should be communicative enough to take all the necessary information and feedback before taking any critical company decision. A director should be that courageous to take on anybody when it comes to making unpopular decisions for the long-term prosperity of the company. He should have a bigger circle of advisors around him to continuously guide him about the pros and cons of any business strategy.

The non-executive board member should be independent and unbiased and not have any material connection with the company, impeding him from working independently. The company could also opt for any professional board member, e.g. lawyer, if his services were required.

Board members should pursue an inclusive approach rather than the exclusive one. That gives all the stakeholders and the other board members confidence and value and develops a proper consensus. Everybody should be on board for working in a crew.

Board members monitor the management thoroughly, keep an eye on everything around them, and execute the plans efficiently. Board members should be curious enough to know and explore new ways of dealing with and capturing more space for their entity. They should make it sure that no confidential information leaks out and no company secret divulged to anyone without informing the board members.

Board members should be assigned purely on merit and for their skills, and they should display that in their functioning and discharge of duties. The boards' remunerations should be in line with best practices.

The members ensure that all the necessary machinery and facilities are to carry out the company's tasks. The annual budget allocated is sufficient for the best possible working of the company.

A company is like an incapacitated person who is created with the help of law formulation, so it's the board members who work on the company's behalf to ensure that all the important areas of concern are well covered. The company is achieving rather than losing.

Responsibilities of Directors: 

Responsibility is an obligation to ensure that specific tasks are performed both by the person who bears the responsibility as well as others. Directors must ensure that the following functions are performed:

Ensure that each director of the entity has time to devote to the entity and committed thoroughly to the entity. 

Each entity Board member is informed about the financial, social, and political environment in which the entity operates.

THE ROLE OF BOARD COMMITTEES:

Board committees are explicitly formed to assist and help the board in its panel selection, auditing, maintaining transparency standards, professional advice, decisions on incentives, and remunerations of the highest executives and directors.

Audit Committee :

For external audit and reports

Internal control and mitigate the risk factors.

Keep a check on audits and gives the forum for drawing audit policies and discuss the audit-related issues.

It gives a complete overview of last year performance and planning accordingly.

Remuneration Committee :

The remuneration Committee is formulated to look after the issues like offering incentives and compensations to the highest authority working in the company, e.g., directors and the CEO. Committee pursues the best practices in choosing excellent human resources for offering perks.

It also defines the fee for the non-executive Directors.

Nomination Committee :

It sets the criteria for the selection of managerial staff and the re-election of the Directors. The Nomination Committee also sees and considers other essential selections and nominees.

ACCOUNTABILITY:

Accountability is another key facet that predicts what the company is going to achieve in the long run. Accountability of all the stakeholders who are working in the company, capital influx, and outflux. Are the board members' practices according to the rules and regulations of the company act and codes? Is there enough meritocracy while selecting the board panel and management and re-electing the Directors? The working is transparent and the timely evaluation of it, independent auditing and public' access to financial information.

GOVERNANCE EFFECTIVENESS:

The effectiveness of corporate governance depends on how effectively the business entities carry out their duties. How much they are clear about the roles assigned to them. How much responsibility they show in carrying out the tasks dedicated to them. How much the entity is willing to bring in fresh changes, including hiring new deserving employees, directors, and the new strategies, all that by striking some kind of balance between changes and the continuity of policies.

Ethical practices are essential to set high standards and professional behaviours within the entity. How the higher authorities present themselves and display a professional attitude in their daily work inspires the employees and management to be aligned with the company's professionalism.

CORPORATE SOCIAL RESPONSIBILITY :

Generating profit is one of the most important tasks for any enterprise, but it has another broader role to play and the general expectations linked with that role. Enterprises take the onus by themselves and transform their entities under the sustainable development model. Sustainable development that guards the interests of all the stakeholders. In this context of social responsibility in business schools, the paper reports findings from a survey of CSR education in Europe. It thoroughly elaborates the extent it is taught, the development in the CSR research work, its courses. It paves the way for further investigation and also gives points to ponder.

Based on numerous studies about the implementation of CSR and its performance and practices in the workplaces, many survey reports were made; the data limit itself to the CSR theme of the investigation and gives key pointers and direction towards many other areas of interest.

CORPORATE ACTIVISM:

Investors in today's age are much more vocal and active towards their expressions. They run campaigns that insist the board members stay in touch with the investors. As a consequence, they play the contributory part towards many structural changes within the functioning of a company. Teams of thorough ex-professionals have been assigned to work with different stakeholders and engage them in all the corporation's strategic and policing decisions. They guide stakeholders on complex business issues, getting into the nitty-gritty that helps them dictate future business planning.

SUSTAINABILITY :

 Corporate governance previously was considered an approach more shareholders specific in which shareholders chose their management, directors, employees, biding by some law and contracts and the solemn goal behind that exercise used to be the profit-making of any firm and how much the investors are gaining back on their investments. But with time, this trend has changed. Corporate governance today isn't just about stakeholders' interests and its profitability to decide if the corporation is doing enough. Corporate governance today is more about the healthy environment in which a company is working. It's about all the stakeholders' joint interests, protection of their rights, including management, board members, and its employees. Today's corporate governance is about transparency, independent auditing, and fair disclosure of all the business details.

Generally, the mode of discussion among had been the social and environmental obligations of the corporation. To what extent a corporation or any other business entity should have social and environmental aspects in its consideration. Many economists believe that social well-being should only be left to the state rather than any business enterprise. Doing that might compromise the profit-making goals of the company. In any given environment, if any corporation is working within the parameters of the law, paying taxes, protecting and paying its stakeholders, and producing good quality products, that's only its contribution towards society. Moreover, that drawing any parallel role for its management to follow would also question their productivity.

Milton Friedman, the Nobel prize-winning economist, famously declared that the exclusive goal of corporate activities was to maximize value for the owners of the corporation.

CORPORATE GOVERNANCE IN FAMILY BUSINESSES. A REVIEW.

Abstract: Family own businesses and enterprises have become a widespread phenomenon now. Many families are running their business even at the level of multinational companies. The creation of wealth, job opportunities, profits is primarily the main focus, like any differently owned business. According to (De Vries 1985), despite having a close network of owner/director relationships and the ability to make decisions quickly, family businesses are generally unable to sustain growth and have a shorter life cycle. The question that arises is the general expectations from corporate governance in an own family enterprise. And what would be the potential weaknesses and strengths in such a business? The focal point here is to discuss the possibilities for successfully governing a family company and the extent to which the corporate governance model is needed to deal with such entities.

Introduction :

All around the world, family-run businesses are making progress and acting as the country's economic engine. It has some obvious advantages and weak points. Firstly in own family businesses, the locus of decision making is very concentrated. A very few close connected people at the helm of affairs plan, dictate and execute crucial business strategies. The close connection between the owners, directors and the management helps in the sense that the decision making could be more prompt without ensuring any broad-based consensus. A family-run enterprise, primarily because of its close environment can face some serious problems. Family own enterprise lacks diversity, skills and talent in the selection of its directors and managerial staff. We can assume in the early phase of such business we might observe an upward graph but in long run with so many alternates in the form of other competitive markets and business complexities the family own enterprise might not take long to crumble.

Another trouble that is attached with such an enterprise is the conflict of interest with many family members who have different priorities working in the same culture. That may emphasize the need of more professional hiring to ensure its longevity.

Literature Review :

Objectives

The objectives of this research study are to look for the pointers that give solidity to the claim that the family-run enterprise has obvious advantages and can be a successful enterprise. 

On contrary, find out the limitations of such an enterprise and thorough study the hardships and weaknesses that the family-run business could face.

Family Business:

Family businesses are soaring worldwide and operating from ranging small-sized companies to medium and large-sized, encompasses almost 70 per cent of the total business in different countries. As per the pearl initiative and Pricewaterhouse Coopers (2012), several large multinational corporations started their business as a family business and around 90 per cent of the world businesses can be defined as family businesses. As we discussed earlier, such enterprises have certain limitations and owing to that, their life span is not that long if such enterprises don't transform and better equip themselves with changing demands of the market. Klein et al. (2005), the state in their study that a business being family managed or owned has its own advantages, the biggest being that the business becomes a source of competitive strength. 

Family Business is the one where the family has the entire control, majority voting power, and generational ownership. Yasser (2011) defines family-controlled businesses as those enterprises that are either owned, controlled, or drastically influenced by a specific family or families and have a significantly dominant position in firms' equity. The executives and top hierarchy are usually from the family that owns the business. Viriri and Muzividzi(2013) state that 'Empirically it has been proven that more than two-thirds of all businesses in the world are estimated to be family businesses. 

References:

Family-owned businesses comprise over 95 per cent of all business establishment worldwide. (Litz 1995)

51 per cent of the world's 200 largest listed companies are family-controlled. Silveira, Leal, Silva and Barros (2007).

Family businesses have a very short life span beyond their founder's stage, and 95 per cent of family businesses do not survive the third generation of ownership (Webpage Of The Family Business Network).

Family businesses account for 80 to 90 percent of the 18 million business enterprises in the USA and 50 percent of the employment and GNP. Yasser (2001), Viriri et al (2013).

In India, family-controlled businesses are 85 to 90 percent of total corporate entities which contribute to 75 percent of employment, 65 percent of GDP and 71 percent of market capitalization. Yasser (2011). 

CORPORATE GOVERNANCE AND FAMILY BUSINESSES :

The importance of corporate governance was felt in the late 80s when many companies failed to sustain profit-making because of fraud, corruption and bad practices. Enterprises felt the need of a strong governance system that consists of professionals to rescue them from this turmoil. Board members, management and other employees were hired to make the progress certain. It was also believed that in family-owned enterprises the wealth conservation wasn't up to the mark. Maybe because of the fact that inherited wealth wasn't appreciated as it should have been by the successors, which had caused the collapse of many family-run businesses.

A family-owned business has its own advantages and drawbacks. Family-owned businesses outperform independently owned businesses, and this probably demonstrates the strength of the family business. Stakeholders working in family businesses seem to have more commitment towards their business because of more deeper attachment and sense of ownership. Family-owned enterprises have more comfortable connection and consensus-building among the stakeholders because of their relationship.

Besides all the advantages that the family-owned enterprises have, they still face the threats of non-professional attitude, in-house tussle for inheritance, complexity, informal behaviours, lack of transparency, skills and biases against the outsiders working in a company.

SUMMARY :

There is a huge void to be filled for corporate governance in the family-run enterprises to bring in professionalism and more credibility.

To further analyze and compare the differences between the family-owned businesses and independently owned entities and to what extent they both are different and the point where they complement each other. Students could conduct more rigorous surveys to know more deeply how exactly the corporate governance model acts in the family-owned businesses and where its actual threshold is.

REFERENCES :

Abor j. and Adjasi, C (2007). Corporate Governance and the Small and Medium. Enterprises Sector. Theory and Implications, Corporate Governance, Vol, 7(2).

Bin Saleh (2006). 'Corporate Governance of Family Businesses. Cairo, Egypt. Art Group Graphic (In Arabic Language)

Bjuggren, P-O and Sund, L-G (2001). Strategic decision making in intergenerational successions of small and medium-size family-owned businesses. Family business review 14,11-24.

Cadbury, A.(2000) Family Firms and Their Governance ; Creating Tomorrow's Company from Today's.

Da Silveira, A.,  Leal, R., Carvalhal, A., and Barros, L.(2007), Evolution and determinants of firm level corporate governance quality in Brazil.

De Vries, M,  F,  K (1985). The darker side of entrepreneurship, Fontainebleau, France; INSEAD.

IFC (2011) (part of World Bank) Family Business Governance Handbook.

Gersick, K.E., Davis,  J.A., Hampton, M.M and Lansberg, I, (1997) Generation to Generation; Life Cycle of the Family Business, Harvard Business School Press,  Boston.

Gulzar, M.A. and Wang, Z.J(2010), Corporate Governance and Non-Listed Family Owned Businesses;An evidence from Pakistan International Journal of Innovation, Management and Technology.

Kets de Vries.M.(1985) 'The dark side of entrepreneurship in Harvard Business Review 63:6, pp, 160.

Klein, S.B., Astrachan, J.H., and Smymios, K.X.(2005). The F-PEC scale of family influence: Construction, validation and further implication for theory, Entrepreneurship Theory and Practice, 29(3), 321-339.

Litz, R, A,  (1995). The family business; Toward definitional clarity, Family Business Review, 8(2), 71-81.

Rothwell, W.(2002), 'Putting success into your succession planning', journal of business strategy, vol, 23, No.3, p.32.

Sarbah, A. and Xiao, W.(2015) Good Corporate Governance Structures; A must for family Business. Open Journal of Business and M a n a g e m e n t, 3 ,  40-57.