Globalisation, corporate governance

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Globalisation, corporate governance

  1. 1. Table of contents:Task Contents 1 Explain the effects of globalization on national economies. Discuss the influence of international institutions on organizations. Explain the role and responsibility of European Union membership on the workplace 2 Explain the importance of responsible corporate governance in organizations. Analyze the regulatory requirements that shape corporate governance. Evaluate the impact of regulatory requirements on corporate stakeholder’s interests in an organization 3 Discuss the economics of adopting a policy of environmental awareness in organizations. Explain the actions that need to be taken by organizations to maintain the environment. Describe the measures that exist to improve workplace health and safety practice 4 Analyse the responsibilities of organizations to improving workforce welfare. Compare approaches to the management of diversity in organizations. Compare organizational approaches to ensuring positive policies of workforce diversity
  2. 2. IntroductionThe internationalization of markets and business activities, increased use of information andcommunication technology and the impact and consequences of the activities of organizations onmany areas of life have meant that organization’s need to be more aware of the contexts in whichthey operate. They have to assume great irresponsibility for what they do. Globalization hasmeant that organizations need to understand the implications of operating in internationalmarkets and have had to develop their policies accordingly. Membership of economic andpolitical unions requires accommodating the requirements of transnational laws and regulationswithin organizational policies and procedures. Corporate governance is concerned with thearrangements for the management of an organisation and the regulation of the relationshipsbetween the organization’s different stake holders. Good corporate governance enhancesorganizational activity and the perception of the organisation as a good corporate citizen. Poorcorporate governance can result in negative perceptions and, more seriously, can contribute tothe failure of an organisation. Consequently, a major focus of corporate governance centers onthe accountability of individuals and organizations to their various stakeholders, including thewider community within which they operate. Organizations have to be concerned with the legal,regulatory, ethical, moral, cultural and environmental dimensions of their activities and the effectthese activities have on others. Corporate social responsibility ensures organisations incorporatethese requirements in their procedures. By examining corporate responsibility, learners willunderstand how consideration of the common interest in organizational decision making impactson the triple bottom-line–people, planet and profit–of organizations
  3. 3. Task 1: Understand the wider implications and effects of global integration onorganizationsGlobal integration: International business environment – PESTLE (political, economic, social,technical, legal, environmental) analysis; market size; economies of scale; multinationalcorporations; transnational corporations; international institutions – World Trade Organization (WTO), World Bank, International Monetary Fund(IMF),Organisation for Economic Co-operation and Development (OECD), The Group of Twenty (G-20); global financial stability; capital investment; emerging economies (tiger economies, BRICeconomies); corporate values; corporate social responsibility; fair trade; transfer pricing;outsourcing; developing world production; human rights; child labour; intellectual property(copyrights, trademarks, patents);corruption; pariah states; piracy; counterfeiting; hegemony;cultural imperialism; cultural factors European Union (EU): Role, responsibility, EU legislation; EU directives; EU membership; EUbusiness regulations and their incorporation into national law; EU policies eg. agriculture (CAP),business, competition, growth, employment, education, economics and finance, employment,environment, science and technology, regional, welfare; Scheme Agreement; labour movement;monetary union; subsidiarity;enlargement (the most up-to-date legislation and regulations mustbe used)Task 1.1: Explain the effects of globalization on national economiesAt the end of 2011, UNECE published the guide "The Impact of Globalization on NationalAccounts", a joint work by UNECE, Eurostat, and OECD under the chairmanship of StatisticsNetherlands.In recent decades, we have witnessed an unprecedented increase in the cross-border movementof goods, services, income and financial flows, as well as people. The phenomenon ofglobalization has gained a new momentum, because of political developments and progress ininformation and communication technology. These developments have had a positive impact onworldwide income and productivity. On the other hand, the recent financial crisis has revealedthe major risks associated with the growing interconnectedness of national economies.Globalization is the process of replacing national economic structures and transactions byinternational ones, which creates difficulties for the statisticians in terms of allocating the valueof production and income to the national economies. For example, knowledge of products orproduction processes, so-called intellectual properties, can be used simultaneously across theworld by multinational or affiliated enterprises, goods can be sent abroad for processing with no
  4. 4. change of ownership, and international trading via the internet can take place without any actualmovement of physical goods.Globalization has both economic and social implications and needs to be carefully reflected incountries national accounts to ensure the relevance and international comparability of thestatistical figures, such as gross domestic products (GDP), national income and exports andimports. The Guide explains how globalization affects the national accounts and providespractical guidance to national statistical offices on how to produce the national accounts statisticstaking the impact of globalization into account. It draws extensively on national experience inthe form of country case studies.The chapters of the Guide are organized in 3 thematic sections. The first section describesmeasurement issues related to multinational enterprises, such as allocation of output and valueadded to national economies and the treatment of foreign direct investments. The second sectiondiscusses trade of goods and services, global manufacturing processes and internationaltransactions of intellectual property products. The third section discusses how to reflectinternational labour movements, remittances, second homes abroad and e-commerce in thenational accounts. The guide also includes an addendum on the impact of the financial crisis.Task 1.2: Discuss the influence of international institutions onorganizationsOne of the most important debates in international relations research concerns the role ofinternational institutions in facilitating cooperation among states. Institutionalists (e.g. Keohane,1984) emphasize the importance of institutions and regimes in mitigating the effects of anarchyon the prospects for cooperation among states. They argue that institutions facilitate cooperationby decreasing transaction costs and increasing the flow of information among member states.Realists (e.g. Grieco, 1988; Mearsheimer, 1994/95) respond that while such approaches examinethe problem of cheating adequately, they ignore relative gains concerns and thus cannot providea compelling explanation for security relations. In fact, Mearsheimer (1994/95:15) asserts thatliberal institutionalism “largely ignores security issues and concentrates instead on economic,and to a lesser extent, environmental issues.” He accuses such scholars of shying away fromarenas in which relative gains considerations matter most.Keohane and Martin (1995:43-44) disagree with Mearsheimer. Because institutionalist theoriesfocus on the role of institutions in providing information, they should be applicable to securityissues, as well as economic and environmental issues. If the institutionalist perspective is correct,
  5. 5. then institutions should promote cooperation, even in situations where states have quite divergentpreferences.The growth in the number and influence of international institutions over the past century hasbeen staggering. According to the Union of International Associations, in 1909 there existed 37intergovernmental organizations (IGOs) of all types, as well as 176 nongovernmentalorganizations (NGOs). In contrast, today there exist over 6400 IGOs, including 251“conventional international organizations” and 2028 “multilateral treaties and intergovernmentalagreements,” as well as nearly 44,000 NGOs.3 Such a trend is consistent with theoreticalarguments developed by neoliberal institutionalist scholars. Institutionalists (e.g. Keohane, 1984)demonstrate the importance of institutions and regimes in facilitating cooperation among rationalegoist states.Institutions (or regimes more broadly) make cooperation more likely in a variety of ways. First,international institutions establish patterns of legal liability. Institutions serve as quasi-agreements and “like contracts, help to organize relationships in mutually beneficialways…Contracts, conventions, and quasi-agreements provide information and generate patternsof transaction costs: costs of reneging on commitments are increased, and the costs of operatingwithin these frameworks are reduced (Keohane, 1984:89).” This relates to the second way inwhich institutions facilitate cooperation, by reducing transaction costs, thus making it easier forstates to negotiate agreements. Multiple issues are often linked, making side-payments possiblein negotiation. Third, international institutions increase the flow of information among memberstates. “Regimes may also include international organizations whose secretariats act not only asmediators but as providers of unbiased information that is made available, more or less equally toall members. By reducing asymmetries of information through a process of upgrading thegeneral level of available information, international regimes reduce uncertainty. (Keohane,1984:94).” In this sense, cooperation is facilitated because international institutions regimesreduce uncertainty.Task 1.3: Explain the role and responsibility of European Unionmembership on the workplaceThe European Union of Supported Employment has developed a Code of Ethics that outlinesprinciples and ethical commitments that demonstrate the competence and responsibilitiesrequired of professionals delivering supported employment. These principles should provideguidance to those working in this area and could also be used as guidelines for self-assessmentand as a quality improvement tool. This Code of Ethics demonstrates the values underpinningsupported employment, upon which professionals develop their everyday practice. The Code isintended to provide both general principles and guidelines to cover professional situations andactivities when delivering supported employment services.
  6. 6. General Principles:Professional Competence:Supported Employment professionals should maintain the highest levels of competence in theirwork, and should recognise the need to update their knowledge in the key areas of SupportedEmployment. They should be responsible for their own continuing professional development andconsult with other professionals to exchange information, share good practice and developprofessional and technical expertise.Integrity:Supported Employment professionals must be honest, fair and respectful of others in theirprofessional activities. Supported Employment professionals should conduct their activities inways that inspire trust and confidence.Opportunity and Equality:Supported Employment professionals must respect the rights, dignity and worth of allstakeholders. They must not discriminate in any way on the grounds of gender, age, religion,race, ethnicity, political opinion, disability, sexual orientation, health condition, dependents orsocial status.They should be sensitive and responsive to cultural and individual differences and needs andprovide equality of opportunity and of outcomes for all individuals.Social Responsibility:Supported Employment professionals should be aware of the impact they have on people’slifestyle and on the communities in which they live and work, they should accept theresponsibility to contribute to social inclusion through employment.Confidentiality:Supported Employment professionals have an obligation to ensure that confidential/sensitiveinformation is protected. Agreement must be sought and gained from the individual regardingmatters relating to disclosure and a professional relationship with individuals must be maintainedat all times.Empowerment and Self-advocacy:Supported Employment professionals have an obligation to actively promote the maximumparticipation, decision-making and autonomy of individuals within the supported employmentprocess.
  7. 7. Task 2: Understand the importance of responsible corporate governance in organizationsA corollary to the focus on corporate behaviour and the behaviour of senior corporate employeesis the attention increaseingly being paid to the qualification of these senior people to carry outtheir responsibilities. There has never been any formal qualification required to run anorganisation, and none to be a director - although in recent years organisations like the UKInstitute of Directors has introduced qualifications such as the Chartered Director to address theissue. In practice, of course, most large and well run organisations will look for suitableprofessional qualifications in their senior staff, and there is an increasing number oforganisations offering non-executive director training and selection services.Task 2.1: Explain the importance of responsible corporate governance inorganizationsCorporate Governance refers to the processes, structures and information used for directing andoverseeing the management of an institution. A good corporate governance frameworkestablishes the mechanisms for achieving accountability between the Board, senior managementand shareholders, while protecting the interests of relevant stakeholders. It also sets out thestructure through which the division of power in the organisation is determined.The role and importance of banks in the financial system and the way banks are fundedunderscores the need for a framework for corporate governance for licensed banks. Thelegislative framework for banks recognises this crucial role and the risk of malfeasance by interalia:  Restricting access to the industry  Defining grounds for revoking a license, including where the conduct of business is detrimental to the public interest or the interest of depositors  Defining types of individuals who cannot serve as directors or officers of a licensee  Imposing large exposure restrictions on lending and investment and  Requiring regular reporting to the Bank, annual audits by independent auditors and public disclosure of financial performance.Task 2.2: Analyze the regulatory requirements that shape corporategovernanceAn effective corporate governance framework requires an effective legal, regulatory andinstitutional foundation, which all market participants can rely upon when they enter into theirmultitude of contractual relations. This legal, regulatory and institutional foundation typicallycomprises elements of legislation, regulation, self-regulatory arrangements, voluntary
  8. 8. commitments and business practices that are the result of a country’s specific economiccircumstances, history and traditions. The desirable mixbetween legislation, regulation, self-regulation, voluntary standards, etc. will therefore vary from country to country. As newexperiences accrue and business circumstances change, the content and structure of thisframework might need to be adjusted. In this process, it is essential to assess the quality of thedomestic framework in light of international developments and requirements.The regulatory and legal environment within which corporations operate is of key importance tooverall economic outcomes. Policy makers have a responsibility to put in place a framework thatis flexible enough to meet the needs of corporations operating in widely different circumstances,facilitating their development of new opportunities to create value and to determine the mostefficient deployment of resources. To achieve this goal, it is important that policy makers remainfocused on the ultimate economic outcomes from interventions. When considering differentpolicy options, it is also useful to undertake an analysis of the impact on key variables that affectthe functioning of markets, such as incentive structures, the efficiency of self-regulatory systemsand dealing with systemic conflicts of interest.In each of the Regional Corporate Governance Roundtables, the need for effective enforcementand implementation has emerged as a key priority. This reflects a view that a sound legalframework for corporate governance, while important, is not sufficient for ensuring the effectivefunctioning of the capital markets. Laws and regulation but also most private arrangementsdesigned to protect the rights of shareholders and ensure equitable treatment of differentshareholders and stakeholders derive their strength from the broader implementation andenforcement environment. If existing institutions are weak, implementing and enforcing privateagreements as well as laws and regulation becomes more difficult. A corporate governanceframework must therefore include both a set of policies and a regulatory/institutional frameworkto ensure its implementation.Task 2.3: Evaluate the impact of regulatory requirements on corporatestakeholder’s interests in an organizationA “stakeholder” is any person or organization that is actively involved in a project, or whoseinterests may be affected positively or negatively by execution of a project. Stakeholders can beinternal to the organization or external. In many projects the public at large will become astakeholder to be considered during the project. The challenge for the project manager when thepublic is a stakeholder will be to act while considering public needs. Often there is no directrepresentative of the public to be consulted during project planning and execution.
  9. 9. A project manager must be sure to identify and list all potential stakeholders for a project.Potential stakeholders include but are not limited to:Competitors National communitiesEmployees Professional associationsGovernment Prospective customersGovernment regulatory agencies Prospective employeesIndustry trade groups Public at large (Global community)Investors ShareholdersLabor unions SuppliersThe project manager must document relevant information for all identified stakeholders. Thisinformation may include the stakeholder’s interests, involvement, expectations, importance,influence, and impact on the project’s execution as well as any specific communicationsrequirements. It is important to note that although some identified stakeholders may not actuallyrequire any communications, those stakeholders should be identified.
  10. 10. Task 3: Understand the effects of environmental legislation, directives and guidance onorganizationsTask 3.1: Discuss the economics of adopting a policy of environmentalawareness in organizationsCompanies began to cooperate to minimize negative effects of pollution and requireenvironmental responsibility. Agreements and international cooperative action have been able topolice and prosecute offenders of reasonable standards of emissions.It is possible to merge economic interests with environmental interests, but the economicthinking dominates and guides the majority of governments is that everything must submit to itand that the ecology is external to the economy. Humans are only part of the nature of business,so the economy should be seen as part of ecology.Environmental issues should be considered one of the most important challenges that face thebusiness world in this first decade of the millennium. Companies should take forward this issueof fundamental importance, acting promptly and a proactive stance instead of abandoning areactive posture.Companies that do not understand this new relationship of forces which destiny is to disappear,because the more the citizen behave as a consumer of ideas and political attitudes, higherpressure occurs on the crucial issue. This awareness was the perception that it is necessary toincrease the profit, but now with the vision of welfare, without harming the environment,educating the consumer in some way to improve the environmental situation. The insanity thataffronts our natural wealth is unthinkable, the economic vision of nature, the concentration ofincome and the domain of scientific knowledge. For that we need more awareness that it isnecessary to break with the lack of human sensitivity, lead to understanding and finding thathuman dignity is in all living conditions in society and the reason to turn over everything inconsumables for obtaining profit .Task 3.2: Explain the actions that need to be taken by organizations tomaintain the environmentWhether youre addressing a companys proposal to build on your local nature reserve orresponding to a serious pollution incident that has poisoned your local fishery, you may be surethat someone, somewhere, will have "expert knowledge" about your problem or at least will havehad a similar experience. If you can make contact with that person or persons, you can learnfrom their experience. Check with others in your area who are concerned with the same issuesand ask their help to find out what resources are available. A lot of time can be saved by notredoing things that have been done before.
  11. 11. An important part of being an effective networker for the cause of environmental preservation isto maintain a constant awareness of what is needed and how these needs can be met. When youbegin to meet people and develop your network, you will become aware that some of the peopleyou meet have needs that can easily be met through the resources of others you have met before.By bringing these people together, you not only assist others in meeting their needs, but you alsocontribute to a common cause-the environment. At the same time you increase the number ofpeople who can assist your organization when it is in need.Task 3.3: Describe the measures that exist to improve workplace healthand safety practiceAll employers are required under the Occupational Health and Safety Act 1983 to accept a dutyof care for the health and safety of all people in the workplace. Implementing duty of carerequires everyone in the workplace to be aware of potential hazards and take steps to preventworkplace accidents, injuries and illnesses.A six point approach:A lack of corporate commitment to health and safety will result in OHS remaining amarginalized and insufficiently funded workplace activity. A six point approach has beendevised to help you implement effective occupational health and safety systems. This plan canhelp prevent accidents, incidents, injuries, and work-related ill health. The six points are:1. Develop an OHS policy and related programs.2. Set up a consultation mechanism with employees.3. Establish a training strategy.4. Establish a hazard identification and workplace assessment process.5. Develop and implement risk control.6. Promote, maintain and improve these strategies.These points are not necessarily in order because all workplaces are different. Some of you maywant to repeat some of the steps at different stages. It is important however, that all six steps areincluded in your occupational health and safety strategy.
  12. 12. Task 4: Understand the socio-cultural, ethical and moral issues that affect organizations inthe current environmentTask 4.1: Analyse the responsibilities of organizations to improvingworkforce welfareSOCIAL RESPONSIBILITY:The term social responsibility means different things to different people. Generally, corporatesocial responsibility is the obligation to take action that protects and improves the welfare ofsociety as whole as well as organizational interests. According to the concept of corporate socialresponsibility, a manager must strive to achieve both organizational and societal goals.Organizations characterized by attitudes and behaviors consistent with the social responsivenessapproach generally are more socially responsive than organizations characterized by attitudesand behaviors consistent with either the social responsibility approach or the social obligationapproach. Also, organizations characterized by the social responsibility approach generallyachieve higher levels of social responsiveness than organizations characterized by the socialobligation approach. As one moves from the social obligation approach to the socialresponsiveness approach, management becomes more proactive. Proactive managers will dowhat is prudent from a business viewpoint to reduce liabilities whether an action is required bylaw or not.Task 4.2: Compare approaches to the management of diversity inorganizations1. LEARNING: Many managers are often unprepared to deal with diversity; because of theirinexperience they do not know how to respond. To better prepare themselves, managers mustwork hard to learn and experience as much as they can about developing appropriate behavior.They can learn more by communicating one-on-one with the young and old employees, women,minorities, and those with disablement in order to determine how best to understand and interactwith them. In this way managers can learn more about a diverse group’s characteristics and howthe workers want to be treated. Managers should also develop personal style that works well witheach worker of a diverse group. Managers can also ask their workers to tell him truthfully thathow they want him to treat them and so he can adjust his behavior towards each worker.2. EMPATHY: Empathy means to put yourself in other person’s place and see things from hispoint of view. Empathy is closely related with learning. It is important in the study of diversitybecause members of diverse group think and feel that only they can truly understand thechallenges and problems they are facing. Empathy is an important way to deal with manyproblems because it helps the manager to understand the point of view of the employee. Whendealing with the minorities and those with physical disables a manager should take special care
  13. 13. and know their feelings. The manager should care about the employee but he should make surethat the employee should not feel that he is receiving a special treatment.Task 4.3: Compare organizational approaches to ensuring positivepolicies of workforce diversity:THE INTERNAL CONTEXT OF DIVERSITY POLICY DEVELOPMENT—ORGANIZATION CULTUREOrganizational culture is usually defined in terms of shared symbols, languages, practices anddeeply embedded beliefs and values (Newman, 1995). This implies a high degree ofhomogeneity within the organization, which may not constitute an accurate picture, oralternatively, the organization may be seeking to become more diverse and for this reasoncultural homogeneity may be perceived as undesirable. In any case, it would be naive to suggestthat diversity and cultural homogeneity could coexist without coming into conflict. suggest thatthe valuing of diversity will not occur naturally. Organizations, including individualorganizational members, will need to be persuaded of the (ethical or economic) merits of valuingdiversity. Following from that, specific and measurable policy initiatives will need to bedeveloped if change is to occur.
  14. 14. References 1. www.corporate.marks&spencers.com 2. www.hfrp.org 3. www.oppapers.com 4. www.health.vic.gov.au 5. www.managementhelp.org 6. Azzopardi, S. 2009. The Evolution of Project Management. Retrieved May 26, 2009, from www.projectsmart.co.uk 7. Mathis, M. 2009. Work Breakdown Structure: Purpose, Process and Pitfalls. Retrieved June 18, 2009 from www.projectsmart.co.uk 8. Heneman, R., Waldeck, N. & Cushnie, M. (1996). Diversity considerations in staffing decisionmaking. In E. Kossek & S. Lobel (eds) Managing Diversity: Human Resource Strategies for Transforming the Workplace. Oxford: Blackwell. 9. Johnson, L. & Johnstone, S. (2000). The legislative framework. In G. Kirton & A. Greene (eds) The Dynamics of Managing Diversity. Oxford: Butterworth Heinemann. 10. Matsuno, K., & Mentzer, J. T. (2000), “The effects of strategy type on the market orientation– performance relationship”, Journal of Marketing, Vol.64, pp.1 –16. 11. www.health.vic.gov.au 12. Gonzalez- Benito Oscar & Gonzalez- Benito Javier (2005), “Cultural vs. operational market orientation and objective vs. subjective performance: perspective of production and operation”, Journal of Industrial Marketing Management, Vol. 34, No. 8, pp.797-829. 13. http://reviews.zdnet.co.uk/software/productivity/0,39024195,39158410,00.htm 14. http://www.ces-vol.org.uk 15. www.leadershipnow.com

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