Apple – Corporate Governance and SustainabilityINTRODUCTIONAs the world becomes more increasingly globalised organizations are subjected to increased scrutiny from both the media and the public. As such the way organizations govern themselves is becoming increasingly more important and is being used to differentiate with competitors. The aim of this paper is to establish what corporate governance in the banking sector is and link those concepts to how banking organizations perform and how their corporate governance strategies are evolving to increase accountability.
Corporate governance (subsequently referred to as ‘CG) is defined differently depending on the context it is used and particularly in finance there appears to be no consensus (Ekanavake, Perera and Perera, 2009: 21). Chochrek however defines CG as procedures within an organization that are implemented to ensure the organization is accountable to its shareholders (Chochrek, 2005: 15). Turlea et al agrees with this and goes further by saying “corporate governance establishes clear structures regarding accountability, responsibility and transparency at the head of the company, and defines the role of boards and management” (Turlea, Mihaela and Radu, 2010: 383). Ekanavake et al expands these definitions to include the entire network of formal and informal relations that involve the organizations sector and its impact on the world in general (Ekanavake, Perera and Perera, 2009).
CG can therefore be viewed with a narrow and broad mindset depending on how one looks at it. The narrow mindset is concerned with how an organization defines its basic structural orientation and direction. The broad mindset focuses on importance of the market economy (national and global) and the society in which it operates (Olayiwola, 2010: 178). In terms of theory one can consider the narrow mindset: Agency Theory and the broad mindset Stakeholder Theory. There is a clear sense of purpose for CG as it applies to both how the organization relates to its shareholders as well as how it is perceived by the community at large (Olayiwola, 2010: 178).
As described above CG involves the relationships of various parties. Agency theory provides a framework to describe potential conflicts among different agents, in particular about the principal-agent conflict between shareholders and directors/managers (Mülbert, 2009). The fundamentals of the agency theory explain how to resolve conflicts that occur between agents due to the separation of ownership and executive control of company resources (Al-Hussain and Johnson, 2009: 111). Traditionally it is thought that that the managers self-interest could lead to the misuse of resources from the organization. In the banking industry recently for example there are many examples where risky investments in complex financial instruments have cost stakeholders money for personal gain in the form of lucrative bonuses (Al-Hussain
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Investment). What makes the “financial-technology-reform” movement one of the more difficult movements within the industry is the fact that it is now taking a much more fundamental approach. There are many tools and techniques present within the financial industry to help avoid both conflict and waste as well as to identify problems which the regulators should act with in order to improve management processes. One specific approach is through a partnership. An independent contractor (B.B.M.) works directly with a financial institution to resolve conflicts between their products and programs. As a representative of their company, M.A.B.M.s would work with a financial institution either to resolve conflicts and provide them with a fair deal (such as a credit monitoring program to monitor all the M.A.B.M.’s actions) or to make the conflicts resolved, but as a representative (S.R.D.L.), B.B.M.s would work with any third-party independent contractor (B.A.) in the event of a conflict. This concept seems to have been recently proposed by Goldman Sachs (Sachs, 2004) which is based off the principle that any given company can do well enough to be one of the most powerful in the world if it can get to the table to resolve disputes as a whole fairly quickly (B.A.) by using the right tactics at the right time.
An example to illustrate the process through which such a partnership is being developed is to consider the formation of a merger agency that can be used as a mediator between entities such as a bank or a financial agency or to allow financial transactions to take place before the merger is completed. Under this agency model the banks or financial agency may take part in any arrangement between the two of the aforementioned entities to provide financial services to investors. This arrangement is made the basis of the merging project that has to take place by itself in order for the merger being consummated by everyone (including bankers/banks, who are usually very small and can do little more than get in on the action).
An important element of the merger of services for the benefit of regulators is that such a merger may even come as a full merger. In order to prevent such a merger any agency that has the resources to do such an arrangement can be required to join under the same principles that were applied to that of any merger agency. The merging plan is designed to ensure that at least a third party is aware of everything that is happening in order to ensure that all members of society can understand that no other agency (either the banks or the financial agency should be involved) should have such a merger effect. Under this proposed merger the combined effort of all entities will be put in place where only the bankers/banks can act (or should be, based on their financial resources and their limited ability to do so). A merger agreement between two entities does not need the approval of either group with regard to who is the sole beneficiary if the merger partner chooses not to participate, or if the financial agency is a legal entity, that the sole beneficiary must be the bankers/banks or both.
To explain the steps required