Creative Writing Essay Sample on Shareholder Engagement: A New Era in Corporate Governance
This article aims at highlighting shareholder engagement importance and the effects it has on corporate governance. It starts by stating just how traditional shareholder engagement consists primarily of annual meetings for shareholders, quarterly dividends calls and analysts conference calls. However, with business development in contemporary settings, the concept of shareholder engagement has evolved to levels where the shareholders request for interaction on one on one basis with representatives of the corporate. Boards already using the strategy of increasing interaction with shareholders enjoy benefits accrued from improved communication with shareholders. However, a large number of organizations are yet to acquire the knowledge of the manner in which the process of shareholder engagement as well as the strategies that might make engagement of shareholders beneficial influence to corporate governance (Deloitte CFO).
The definition of corporate governance is highlighted as the structure via which corporate and other organizations are directed and controlled. Governance structure offers guidelines on the level to which varying individuals within a corporate are responsible. Varying individuals have varying roles within an organization. The corporate governance structure is responsible for assignment of duties to different capacities within an organization. For example, a large number of organizations have senior managers, board of directors, stakeholders, creditors, regulators, and managers. These groups play different roles. This implies most organizations have mechanisms that monitor policies, actions and decisions of corporate. In the governance of any corporate, there should be interest’s alignment brought forward by the stakeholders. For example, the shareholders primary interest is maximization of profits. However, this raises conflict of interest with stakeholders’ interests like managers who are concerned with employee welfare. Employees should be offered good working conditions and benefits as well to increase the profits made by the organization. In the contemporary business world, it is crucial to strike a balance between the needs of the organization and the varying stakeholders interests.
However, where decision making is concerned, some of the stakeholders are left out which means their interests are not reflected on the processes of decision making. Employees are among the most notable stakeholders groups seldom consulted. This leads to a state where employees are offered milestones, given tasks and goals that they have not taking part in developing. Stakeholders are the other group and majority of corporations have the notion the major interest of stakeholders of their dividend earning rather than the running of the organization or the manner in which decisions are made. Due to this, situations have arisen where the corporations fare badly and shareholders are subjected to immense losses because they are not part of the decision making process. This is especially true in the case of international business where the decisions made are bad and the strategies inappropriate leading to non-performance of the corporations affected. It is crucial to note the international business scene has seen many organizations failing. While it might not be particularly true that involvement of shareholders is crucial for salvaging an organization, it is critical to note there are numerous organizations that have enjoyed significant success by engagement of shareholders.
Corporate corporations’ governance in international market has elicited great interest in the modern world. This is especially true whenever it comes down to accountability. From the start of the century, collapse of international corporations has been recorded. This has proven crucial in ensuring corporate governance is put under intense scrutiny by diverse entities which includes people, governments and other parties interested. Despite the significance of corporate governance in the modern business environment, majority of organizations have proven reluctant to engage shareholders in governance. This implies the mistakes are attributable to corporate governance can in some way be associated with stakeholders and still, they suffer from similar mistakes.
There are numerous benefits and opportunities derived from engagement of shareholders. Some of these benefits include rapport growth, enhanced transparent as well as respectful interaction. Shareholder engagement process is supposed to be started after careful preparation for purposes of ascertaining the effectiveness accrued from dialogue and ensuring that all the parties benefit from it. The corporation is supposed to look at where crucial ownership lies. This is due to the fact it would be close to impossible for any organization to engage all the shareholders effectively. Finding the appropriate shareholders to engage is critical in the enhancement of shareholder engagement and the kind of influence it will have on corporate governance (Deloitte CFO).
The organization also needs to highlight a communication strategy that is efficient. This might involve the management looking at various issues like the shareholders engagement objectives, communication means, involved parties, dialogue frequency as well as documentation of concerns shareholders raise. Corporations can also use the assistance of third parties for purposes of establishing and defining such parameters. The approach most common and identified among corporate as the most favorable is documented and proactive approach instead of the traditional approach which involves response to ad hoc demands made by stakeholders.
For engagement of shareholders to be beneficial and successful to governance of a corporate, it is crucial for the corporate to have an agenda prepared ahead of dialogue. The agenda is supposed t be inhibited to specific topics that involve the shareholders, board of governors or any other representatives. This is of great importance to eliminate miscommunication. It is also critical towards ensuring the Regulation of Fair Disclosure by the Securities and Exchange Communication is not in any way, violated.
Also, there is the issue of who is supposed to take part in the engagement of shareholders. The IRO, traditionally was responsible and often, the only representatives in meetings of shareholders. However, this tradition is phased out and there is inclusion of the general counsel representatives as well as the management team now. It is noted shareholders main interest is holding dialogue with independent directors so they can get unbiased information (Deloitte CFO).
It has been ascertained as well that shareholders are interested in talking with the compensation committee chairman. This has proven critical in making sure shareholders are offered great insights on executive compensation. Generally, the engagement of shareholders in corporate governance as well as decision making process is viewed as beneficial to all the stakeholders. There is the anticipation shareholder engagement will continue manifesting itself across different kinds of corporations. Within the international market, corporate governance is crucial in making sure people have great faith in such organizations. This can only be attained through ensuring shareholders get involved in the process of decision making. Shareholders are critical in highlighting varying international markets the organization ought to focus on. Involving shareholders in corporate governance is also of great importance towards ensuring the aspect of accountability is always upheld. What is more, it is also crucial in ascertaining that the organization survives within the international market.
Deloitte CFO. Shareholder Engagement: A New Era in Corporate Governance. The Wall Street Journal, October 4, 2013. Retrieved on October 6, 2013 from http://deloitte.wsj.com/cfo/2013/10/04/shareholder-engagement-a-new-era-in-corporate-governance