Topic – corporate governance
4) Understanding ethical behavior in the context of corporate governance requires two levels of analysis: the internal concerns of corporate agency and the emergent effects on social welfare. Discuss. (250 words)
Discuss- this is an all-encompassing directive which mandates us to write in detail about the key demand of the question. we also have to discuss about the related and important aspects of the question in order to bring out a complete picture of the issue in hand.
Key demand of the question.
The question wants us to write in detail about the determinants and consequences of ethical behaviour on part of the corporate organisations in terms of the internal concerns of the organisation and its social welfare activities.
Structure of the answer
Introduction– Write a few introductory lines about the importance of ethics in general and in corporate structure which usually works on purely commercial interests.
- Discuss the importance and role of internal concerns of the corporate agency in deciding the ethical/ unethical behaviour by the corporates. E.g Corporate agency is based on the premise that Agents- employees, managers, and directors should behave in the best interests of Principal- owners or shareholders . Two things get in the way of that ideal: managers’ interests, while overlapping with those of shareholders, are distinct. Sometimes agents can help themselves in ways that hurt the firm and its shareholders; Second, shareholders have neither the specific knowledge nor skills possessed by management. That can create a dynamic where even well-intentioned managers may feel compelled to “short-termism,” i.e., acting in ways that look good to shareholders now, but actually undermine value creation over time etc.
- Discuss the importance and role of the emergent effects on social welfare. E.g Social welfare is based on the premise that companies should engage in fair dealing with all of their stakeholders—including customers, employees, suppliers, and communities, as well as shareholders—in accordance with the expectations of the larger society in which they operate; companies benefit from at least nurturing their reputations among all stakeholders, and minimizing their negative externalities (pollution, plant closures, etc.) preserves the freedom of companies to operate with otherwise minimal external constraints etc.
Conclusion- based on your discussion, form a fair and a balanced conclusion on the given issue.