There has been an increased concern about how to manage the affairs of a company because many organizations have been recording losses in their organizations due to poor management of the company’s human and financial resources. An organization can carry out its activities effectively by having its company been headed by personnel who are qualified to handle the affairs of an organization such as the directors who are appointed at the annual general meetings of a company. At every financial year, a company prepares meetings whose objective is to inform the shareholders about the activities of an organization and to also appoint the directors who should handle the affairs of a company. The appointment of the directors is done by conducting elections in a company in the annual general meeting, an employee who gets the most votes against its rivals is appointed as directors of a company.
The stakeholder’s theory provides the basis in which concepts that are useful to the well-being of a company are established these concepts are: corporate social responsibility, corporate social responsiveness, and corporate social performance. Shareholder theory is a theory that is used to identify the groups of people who are the owners of corporations such as the stakeholders; it also describes and is used to recommend the methods that an organization should use to give the shareholders returns that are worthwhile to them.
The shareholder theory is categorized into the following ways such as descriptive or empirical, instrumental, and normative method. The descriptive or empirical approach is used to describe and explain the company’s characteristics and behaviors.
The instrumental stakeholders’ theory brings out the relationship of stakeholder approaches and its desired objectives as the profitability or stability or growth of an organization. It implies that when a person uses this theory in their organization they achieve conventional corporate performance better than their rivals. The normative stakeholder theory involves accepting the interest of all stakeholders’ intrinsic value. It shows that the managers of a company carry out activities for their benefit but not the benefit of an organization at large. According to Donaldson and Preston, they stated that the three theories are useful, but normative theory supersedes the other stakeholder theories.
The objective of the stakeholder theory is to express the role of organizations is to maximize profits that lead to the maximization of shareholder value.
The director’s role in a company is to run the affairs of a company as per the interest of the shareholders.
The fiduciary duty of a shareholder is to pursue his client’s interest in the best way possible. According to Boatright, he argued that the relationship that existed between the shareholders and the directors was that of the principal-agent relationship He also stated that the directors as agents of the corporation had the power to act on behalf of shareholders in so far as this was understood in the legal sense of changing the relationship between the principal and the agent. According to Sternberg, she argued that the role of the directors was to meet the needs of the shareholders as well as that of the other stakeholders who were interested in the operations of a company. Mrs. Sternberg recognized the fact that the property rights were seldom, but this did not warrant the other stakeholders to be treated fairly as they were not the owners of the company.
According to the case of Mr. Robert Maxwell who was a renowned businessman he started his operations from a humble beginning because he came from a poor family thus he worked very hard to achieve his objectives until the time he owed his businesses in the year 1940. He owned two businesses these were: the Maxwell Communications Corporations and the Mirror Group Businesses that were publishing firms and performing well in the country, but because of the mismanagement of the company’s resources, it went into receivership. The management of the company under Mr. Robert Maxwell’s leadership was in financial difficulties because they had over-invested in so many assets and this led to the company incurring huge debts that it would not pay.
It was also recorded that Mr. Robert Maxwell misused his power by exploiting the customers because he plundered the pension funds that were meant to finance the customers once they attained their retirement age. He used the pension funds to finance his businesses which were not performing due to huge debts which were a result of borrowing so much money from the investment banks. The technique that was used by the manager of the newspaper businesses to attain his ambition was by bullying and intimidating his employers, thus he was performing his activities for his interests, than that of the people who were interested in the operations of the business and this led to poor performance of the business. Mr. Robert Maxwell had a high level of cunning tactics that he acquired from the British colonialists who conducted corruptible activities and he used these activities to acquire wealth for his business.
The management of the company should have established a board of directors that would provide entrepreneurial leadership, which would ensure the implementation of the controls, which would be used to assess and manage the risk that affects the performance of a company. According to an investigator, he stated that the mistakes that were existing in Maxwell Communication Corporation were a result of the manipulation of the profits of the company it was clear that he was not eligible to run the affairs of the company and he was also a dishonest person. The management of the company should have implemented the company’s strategic aims and objectives which would ensure that the financial and human resources were put in place so that the company met its objectives and it would have been in a better position to review the performance of the employees and this would have solved the problem of harassment of the workers.
Mr. Robert Maxwell should have appointed directors to his company so that they would oversee the performance of the company. The role of directors in an organization is to scrutinize the performance of a company in ensuring that the goals and objectives of a company are achieved. They are also responsible for determining the appropriate levels of remuneration of the executive directors are in place to motivate them to perform their activities effectively, they are also charged with the responsibility of appointing qualified personnel into their organization and to also remove underperforming employees as part of their strategic planning programs. The board of directors is charged with the responsibility of preparing annual reports which indicate how a board and how their duties are delegated among the employees of the organization so that appropriate employees are assigned jobs that they are in a position to perform.
The boards of directors are charged with the responsibilities of evaluating each of the employee’s performance to determine whether they are performing effectively in a company. The chairman heads the board of directors should act on the results of the performance of the employees so that corrective measures are made to curb the factors that affect the performance of a company. They also address the weaknesses of the employees of the company.
In the case of Robert Maxwell, he should have appointed the board of directors who would recruit the kind of employees that would perform the operations of the company effectively instead of bullying the employees who did not perform according to the company’s policies and regulations.
The public limited company usually issues shares to the public to finance their operations thus the people who buy shares from this company are known as shareholders. According to the Company’s Act, the shareholders are the owners of a company therefore they have the power to appoint the directors whom they would like to manage the operations of a company. In the case of the Mirror Group Newspaper (MGN) and the Maxwell Communication Corporations businesses, the shareholders who were the owners of the companies should have protested against the leadership of Mr. Robert Maxwell so that they would have appointed a leader who would have led the good performance of the company.
The management of the two newspaper businesses should have installed internal control systems into their company because these systems would ensure that the weaknesses in the organization were recognized so that corrective measures are taken to curb the inefficiencies. The audit committees play a significant role in the management of an organization since they monitor the integrity of the financial statements of a company, they review the company’s internal controls, they also monitor and review the effectiveness of a company’s internal audit function and they make recommendations to the board concerning the shareholder’s general meetings appointment, re-appointment and the removal of the external auditor so that they approve the appointments.
The characteristic of a sound of an internal control system consists of policies, processes, tasks, and behaviors of a company which enhances the management of a company to be done effectively. The objectives of an internal control system are to facilitate the effective and efficient operation of a company by ensuring that it responds to business, operational and financial compliance to safeguard the assets of a company so that they are not misappropriated, to facilitate quality internal and external reporting and to ensure the application of compliance laws and regulations.
It is therefore important for organizations to install effective internal control systems that would ensure that the performance of a company is handled with care since they are in a position to point out inefficiencies of an organization. The management of companies should appoint directors who can run the affairs of a company according to the company’s policies and regulations so that the objectives of a company are achieved.
Reference
Charles, O. and Blume, D: 2005.Corporate Governance: A Development Challenge. Policy Insight No. 3. Paris: Organization for Economic Co-operation and Development. 4 p. Web.
Charles, O., Fries, S. and Buiter W. Corporate Governance in Developing, Transition and Emerging-Market Economies. OECD Development Centre Policy Brief No. 23, Paris: Organisation for Economic Co-operation and Development, 2003. 49 p. Web.
Coelho, P.R.P. McClure, J.E. Spry, J.A. 2003 ‘Why Corporate Social Responsibility Is Corrosive To Capitalism’ Mid-American Journal of Business United States.