Corporate Governance Benchmarking
After reviewing the McBride Financial Services scenario, you will identify several issues that directly connect to the concepts in the mind maps for Weeks 1 through 3. In addition to reading the assigned text materials to develop knowledge about the concepts, a thorough master's-level education requires the development of effective research skills. In this assignment, you will work collaboratively to create a rich source from which you will individually develop alternative solutions for McBride Financial Services.
Individually, identify and research two companies that have faced specific issues related to those you identified in the scenario and connected with the course concepts. For each company selected, discuss the following in a 350-word synopsis: (A) issue identified in the scenario that is also facing the company, (B) how the company responded to the issue, and (C) outcomes of the company's response to the issue. Thus, each team member should have two 350-word synopses, one for each company, which provides the information identified. To avoid duplication of efforts, each team member should identify, to the team, the companies he or she will be researching before doing this part of the assignment.
As a team, based upon the information gathered from the individual work done in Step 1, prepare a 1,050-word to 1,400-word analysis that synthesizes the key findings. As a team, using the companies researched: (A) identify the key course concepts and (B) compare and contrast the practices of each company related to those concepts. Appropriately cite all references used.
The team will submit a final composition which consists of a title page, the team's overall analysis, the individual company synopses (with the preparer of each synopsis identified), and an appropriate reference page. As a guideline, a team of five will submit roughly 13-14 pages of material as well as a title page and reference page.
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It is difficult not to notice the seemingly constant media commentary about the lack of trust in today's business climate. In the past decade the business community has suffered some of the worst corporate crises, both financially and ethically, since the Great Depression. This crisis of faith brought about through numerous corporate scandals beginning with Enron, and carried on by a variety of other companies on various scales, has been a valuable wake-up call for the business community. It has alerted companies to the link between ethical behavior and corporate efficiency which has always existed, but has been swept under the carpet by other seemingly more exigent business matters (Davis, 2004).
These scandals, however, have demonstrated that ethical behavior and what it takes to make it standard business behavior should be at the top of every company's agenda. Research and analysis show that there is a link between corporate efficiency and various aspects of corporate governance such as the independence objective, roles of key corporate governance players, especially that of the Chief Executive Officer (CEO), and the role of ethics in compliance with regulations.
The independence objectives of corporate governance
While it is a part of good governance structures and practices within companies to have independent boards, and all-independent key committees in place, such policies are not a panacea for all corporate governance issues in and of themselves. Although such practices ensure that directors have the necessary independence to perform their oversight functions over corporate performance, and the chief executive and other senior managers, their effectiveness should not be measured with a one size fits all yardstick for all corporations. For example whether a company has a lot of insiders on its board or if a board's chairman is also the company's chief executive do not necessarily point to bad governance in an organization although on the surface they give the impression that managers control the company unchecked and can enrich themselves at the expense of outside shareholders without fear of consequences (Wharton School of the University of Pennsylvania, 2004).
Other issues such as whether the CEO's family, close friends and associates dominate the board, how much board members and managers are paid and whether their pay and incentives are linked to raising the company's earnings and stock price also factor into a company's independence evaluation and have different degrees of relevance for different companies. There is no one formula that can measure whether a company's governing body has a sufficient measure of independence. Each company's needs are different in this area and each company should tailor its policies to what works in its particular setting. Before making any adjustments to ensure the independence of its governing body, each company should benchmark such adjustments by finding other companies that have made similar changes and see whether the benchmarked companies experienced a rise in their stock prices as result (Wharton School of the University of Pennsylvania, 2004).
Governance-ranking research is another more scientific way to determine whether there is a link between one or more governance standards and a company's performance. Research that focuses on only one standard, like composition of boards, may lead to incorrect conclusions because single governance standard may be unrelated to the performance of a given company in a given market during a particular period of time. The most plausible research focuses on a core set of governance standards and attempts to identify which standards are directly related to performance. A published research study by Bebchuk, Cohen and Ferrell in 2004, as well as other governance-ranking research provides support for the proposition that good corporate governance does in fact improve performance and thus is worth undertaking (Hermes Investment Management Limited, 2005).
GE and JC ...
This is Generic Benchmarking Research in Corporate Governance for McBride Financial in MMPBL570.