External control in organization (corporate governance)
CORPORATE GOVERNANCE IN ASIA (GMGG 5314): EXTERNAL CONTROL IN ORGANIZATION Present by : Raja Abumanshur Matridi (810083)
DefinitionCorporate governance refers to thesystem through which the behaviour of acompany is monitored and controlled.(Stephen Y.L. Cheung and Bob Y. Chan,2004)Controlling is the process of measuringperformance and taking action to ensuredesired results (Schermerhorn, 2011)
DefinitionControl consists of verifying whethereverything occurs in conformity with theplan adopted, the instructions issued, andprinciples established. It‘s object is topoint out weaknesses and errors in orderto rectify them and prevent recurrence(Fayol :1949)
Continue...External control includes any rule or regulationwhich has an effect on the actions of thecompany, and can include tax laws enacted bythe government which affect the flow of money,a lease which restricts what a company can orcan not do with their office space, and lawswhich prevent discrimination in the companyshiring procedure.
External AuditorRole of External AuditorOther organizations had fully outsourced thefinancial audit to external auditors (Paape, 2007)One measure which could contribute tocorporate governance efforts in addressing theagency problem is the external auditor’sinvolvement (Marianne, 2009)
External ControlJensen (Waymire, 2008) There are threeExternal Control mechanisms :1.Market for corporate control2.Legal, political, regulatory system and3.Product and factor market
External Controlschermerthon (2011) External Control includeas follows :1.Bereaucratic or administrative control (2.Clan or normative control3.Market or regulatory control
External Control1. Bereaucratic or administrative control uses authority, policies, prosedures, job description, budgets, and day to day supervision to make sure that behavior is consistent with organizational interests
External Control2. Clan or normative control influences behavior through norms and expectations set by organizational culture. sometimes called normative control it harness the power of group cohesiveness and collective identity
External Control3. Market or regulatory control influence of market competition on the behavior of organizations and their members. Business firms show the influence of market control in the way that they adjust product, pricing, promotions and other practices in response to customer feddback and what competitors are doing.
Capital MarketCompany control occurs via numerous channelsboth from within and from outside like thecapital and commodity markets .external control via the capital markets becameincreasingly stronger due to deregulation andthe revolution in information technology(Pellervo. 2000)
Figure of External Control Market for corporate market : capital markets, market competition, product market, customer and comodity market. the role of environmental Government : influences : Regulation or Statutory, the media pressure, theDeredulation, bureaucracy revolution in information technology, and electronic media External Control in Organization (Corporate Governance)
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