Corporate Governance is Important Function of Public Company

Question: Discuss about theCorporate Governance is Important Function of Public Company. Answer: Corporate governance plays a very important role in the smooth functioning of the operations of company. It is regarded as the backbone for every type of companies and majorly public companies across the globe. The public company will not be able to satisfy the ever changing requirements of the public and their stakeholders including the potential investors unless the company has the system of good corporate governance (Dandino, 2014). In common parlance the corporate governance deals with the top management of the company and is related to the proper functioning on the part of the personnel involved at that level. But in actual the corporate governance is related with the timely and accurate adoption of the practices in the company which is regarded as the best and implementation thereon. It is also related with the compliance with the rules, regulations and the laws as applicable in the respective country to the public company and adherence to the ethical code of conduct and standa rds so as to ensure that the company so concerned has discharged the responsibility towards the stakeholders including the society of the organization. The corporate governance has not risen immediately rather it has gained the importance from the last two decades when stakeholders feel that they are being informed in the very helpful and delight manner. Every public company is required to publish the corporate governance statement as annexed to the annual report of the company at the end of every reporting period. It is required to be disclosed as per the statutes and laws. Managers are the personnel employed in the organization who deals with the particular function of the company. The function may be purchase, it may be sale, it may be production, it may be marketing and etc. The personnel who manage the particular function are known as the managers. For instance Marketing manager of Australia division, purchase manager of Pilbara plant located in Australia. Managers are solely accountable and responsible for all the functions and activities taken by them in order to reach at the common goals of the business organization (Arjoon, 2013). Objectives of the organization depend upon the nature and size of the business of the company. Managers employed in the organization shall perform its functions in the efficient way so as to achieve the objectives of the company on one hand and strive to provide the society with the long term benefits on the other hand. Most of the companies have been found where the companies end up with the zero results due to the adoption of the short term benefit policy. Such system has been first introduced and failed and is known as Anglo American corporate governance system. The role of the finance manager in the finance sector is to generate the time value for money so that not only the company can have the long term benefits but also the society can have the returns for the longer period to come. Value is the total of the equity share capital and reserves of the company. The big problem that is being faced by the company in the achieving of good corporate governance is providing of maximum satisfaction to the stakeholders of the company (,Jensen, 2011). Value maximization of the firm will always lead to the maximization of the shareholders wealth and the finance manager of the company sometimes becomes the agent. Manager has been regarded as agent in the sense that he has to look after the needs of the organization as well as the need of the stakeholders including the shareholders of the company (Letza, 2014). The finance will be obtained by the company only when the company will provide the maximum return to their shareholders and on the other hand the company will pay the return to the extent it does not extend beyond the increase in cost of financing the same (Freeman, 2012). In accordance with the stakeholder theory, the finance managers are required to consider the interest of every shareholder and the stakeholder of the company and shall always try to make the tradeoffs between the interest of the numerous of the stakeholders (Fontaine and Schmid, 2016). If the manager starts making tradeoffs then he or she will end up with the zero results. Therefore, managers are required to first focus on the objective of the company then he will check for the stakeholders interest. For instance, one company has approached the finance sector company for the funding requirements. The company has planned to develop the cold chain industry for fruits. As this is the infrastructure sector, government provided the benefits in the shape of the subsidy to the company. Now the finance manager is solely responsible for conducting the feasibility study of the project of the company as to how the project will work, whether the company will be able to generate the profits in future so as to have paid the amount of the installment. Thus, in this way the finance manager will function in an organization. All the functions that the finance manager undertakes are related to the system of having the good corporate governance. It is in the sense that as the company is the finance sector company there may be the chances of default from the customer side with regard to the default in making payment of the installment. Its the finance manager which helped the company in making the procedures where there will be the chance of having such non payments as lower. All the processes and procedures that the management of the company has laid down are covered and are as per the corporate governance of the public company (Jensen, 2011). In order to conclude with the discussion, the corporate governance is the most important function of public company and every company shall disclose the matters related to the compliance as well as non compliance with the provisions of the applicable laws. Finance managers in case of financial sector company will always be treated as agent and the same is responsible for maintaining the relationship between the two company and the stakeholders of the company. References Arjoon S. , (2013), Ethical Orientation for Future Managers : The Case of Trinidad, Social and Economic Studies, pages 100-114. Dandino P. (2014), Corporate Governance : Something for everyone, Franchising World, pages 40-41. Freeman R, (2012), Stakeholder Theory and The Corporate Objectives Revisited, Organization Science, Pages 366-368 Fontaine C and Schmid S, (2016), The Stakeholder Theory accessed on https://www.martonomily.com/sites/default/files/attach/Stakeholders%20theory.pdf accessed at 30-04-2018 Jensen M, (2011), Value Maximization, Stakeholder theory, and the Corporate Objective function, Journal of Applied Corporate Finance, Morgan Stanley. Jensen M, (2011), Value Maximization and Stakeholder Theory, accessed on 30-04-2018 available at https://hbswk.hbs.edu/item/value-maximization-and-stakeholder-theory. Letza S, (2014), Shareholding Versus Stakeholding : A critical review of Corporate Governance, Blackwell Publishing : USA.