Principles of Good Corporate Governance Essay Example | Topics and Well Written Essays - 1000 words - 2

Principles of Good Corporate Governance - Essay Example Corporate governance is a complex amalgamation of legal, moral and economic/financial issues closely associated with financial scandals, concerns of stakeholders, and social/environmental activism, all rolled up in one. It raises several critical concerns regarding the manner in which the organizations must operate; the moral/ethical responsibilities of companies towards the stakeholders; the financial responsibilities towards their directors and shareholders; and ways to uphold the interests in the larger benefit of the society/community. However, one of the most crucial aspects of corporate governance is to ascertain that the individuals in the organization are held morally accountable for their business practices or their actions and repercussions of the same, towards the society (Colley, 2003, Pp. 13 - 18). The Body Shop – a company with activism as a part of its DNA is a prime example of companies, with ethics as one of its core business practices. The company gave prime importance to a range of social issues through its campaigns - such as the one against human rights abuses; policies in favor of animal and environmental protection; its commitment to society through charity etc., to name a few. It was one of the few commercial organizations which revolutionized the corporate world, through the incorporation of ethical principles as a part of its core business practices (Witcher, Chau, 2010, Pp. 43 - 45). The company was taken over by a leading cosmetics brand, L’Oreal, with drastically different business practices, in the year 2006. As opposed to The Body Shop, L’Oreal on the other hand, involved in animal testing, which caused a furor among animal rights activist, in the process giving bad repute to the trusted brand. Positive and negative lessons learned from these business practices and approaches One of the key lessons learned, from the case of The Body Shop is the fact that contrary to popular opinion, hard-core commercial organi zations, as opposed to not-for-profit organizations, can also implement socially relevant business practices, which have the greater interests of the community at large. The company successfully implemented such principles during the 1990s thus, revolutionizing the profit-oriented and highly commercial competitive corporate world. Furthermore, it is also reaffirmed that the contemporary corporate world, must seek to pursue social and environmental issues, and be more stakeholder-oriented in their approach, rather than profit-seeking, stockholder oriented one. The 21st century has given rise to a phenomenon called ethical consumerism. The consumers today are far more aware of social and environmental issues and are highly active in defending their rights. Companies which tend to ignore their interests might have to face a mass boycott of their products, as is observed in several instances in the past such as the case of Nestle and Nike in the 1990s and The Body Shop in the recent tim es (Crane, Matten, 2007, Pp. 421 - 423). Thus over and above the legal consequences, the companies are at risk of losing their brand image and garnering a bad reputation among the public, thus having a serious negative impact on their competitive positioning the industry translating into huge financial losses.