Business Process: Corporate Governance
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Business Process: Corporate Governance
The business process chosen is corporate governance as a business process. Corporate governance can be defined as the process of combining rules and practices in a company in order to achieve its set goals. It falls under the broader category of management processes. It usually balances the interests of the company’s stakeholders, such as executives, customers, and financiers (Bhagat & Bolton, 2019). All the major managerial decisions go through corporate governance because it aims at optimal growth for the company.
Good corporate governance reduces the costs of capital. In a volatile environment, implementing good governance leads to the reduction of the company’s costs. When an organization is stable and reliable, it can mitigate possible risks and be allowed to borrow funds from stakeholders like financiers at a relatively lower rate than other companies with weak corporate governance (Bhagat & Bolton, 2019). Good corporate governance also enables a company to have a better strategic plan formulation. More successful strategies come with more efficient and rapid access to information concerning the company and a good communication system between the management and the other stakeholders.
Excellent corporate governance leads to improved and top-level decision-making. A
the company improves its performance through rapid and top-level execution of decisions made both at the governance and the managerial levels. Several failures in executing the daily operations in a company have direct links to poor decision-making that come with poor governance (Bhagat & Bolton, 2019). Therefore, good corporate governance, as a business process, promotes and supports an organization’s sustainability.
Despite the positive aspects of corporate governance, there can be several issues
associated with the business process. The first issue is a principal-agent conflict when shareholders do not participate in managing the business activities but instead get professional managers to do the work for them. These managers might have different goals and perspectives from the shareholders who employed them. This is where the conflict originates from. Corporate governance requires the board to have a fiduciary duty (Bhagat & Bolton, 2019). This ensures that the board acts in the best interest of the corporation. If corporate governance is not honest or prudent and ends up breaching the duties that it is responsible for, and it can be held liable.
On average, corporation governance falls into the “managed” ITIL Process Maturity.
Framework (PMF) level. Corporate governance is usually a well-defined process, with its objectives well aligned with company goals.
As a business process, company governance needs several improvements so that it can reach the highest level of the ITIL PMF. These improvements include:
- Having a diverse corporate board
- Making sure that board members are competent, and
- Ensuring that risk management is prioritized.
Having a diverse corporate board ensures that governance has a rich pool of
constructive ideas from diverse backgrounds for optimum governance. Diversity helps in improving board performance. An organization should appoint board members with top-notch competence. Board members should be honest and prudent in their daily duties, as this reflects their competence. Finally, ensuring that risk management is prioritized ensures that the company executes decisions that have manageable risks. This way, sustainability is ensured. These improvements can raise the Corporate governance process to the optimizing level of the ITIL PMF.
Reference
Bhagat, S., & Bolton, B. (2019). Corporate governance and firm performance: The sequel. Journal of Corporate Finance, 58, 142-168.