Corporate Governance Essay essay sample

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CORPORATE GOVERNANCE

Abstract

This paper analyses the differences in the corporate governance structures in organisations located in different countries having their own corporate governance codes. Germany has dual system of governance with a Management board and a Supervisory board. While the management board is entrusted with the responsibility of day to day management of the enterprise, the Supervisory board as the name suggests monitors and coordinates the functioning of the managing board after appointing the members of the managing board.

Each board has its own chairman who is expected coordinate with the other board through its chairman. However, the supervisory board is vested with the responsibility taking major decisions. On the other hand, the UK has the unitary system of corporate governance in which there is vertical unity of control and it achieves purposes of the two boards namely managing board and supervisory board. As for the impact of the corporate governance structures on the board accountability, board diversity and board effectiveness, it cannot be said that one system is superior to the other as both are driven by the same corporate governance objectives of maximizing stakeholders’ values.

1. Does the geographical location of the two businesses mentioned above have an impact on their corporate governance structures? If yes, critically review these differences. Hugo Boss is a German based corporate entity and it has to comply with the German Corporate Governance Code. The Code prescribes dual board system as a corporate governance structure for German stock corporations such as Hugo Boss. The dual board structure comprises of Management Board and Supervisory Board in order to ensure long term survival of the corporation and value creation in accordance with the tenets of social market economy. Thus, the Management Board is entrusted with the responsibility of managing the corporate enterprise. The Chairman of the Management Board is required to coordinate the functions of the Management Board. The Supervisory Board appoints the members of the Management Board and supervises and advises the members. The supervisory board takes major decisions that are of fundamental importance to the company. The Chairman of the Supervisory Board coordinates the functioning of the Supervisory Board. The shareholders of the company elect the members of the Supervisory Board at the General Meeting. Where there are more than 500 or 2000 employees in Germany, employees also receive representation in the Supervisory Board. The strength of employee representatives in the Board shall be one third in the cases of more than 500 employees and one half in the cases of more than 2000 employees. The Chairman of the Supervisory Board in the cases of more than 2000 employees acts as a representative of the shareholders and holds the casting votes when there are split resolutions. The Code recommends mandatory compliance which the companies can deviate from subject to the condition that deviations are disclosed annually. The Code applies not only to the listed companies but also group companies that are designated by the term “enterprise” instead of “company” (Unodc.org, n.d.). …

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