Corporate Governance Harvard Case Solution & Analysis

Corporate Governance Case Study Solution

Oversight Issues

For the listed companies, effective and efficient corporate governance required the over sightedness of board of directors on the company’s policies and procedures. The lack of over sightedness from the board is a severe challenged faced by the GSK as a consequence of which it lost its ranking.

Transparency

It is the requirement for a listed company to report true and fair values and make them available for the investors. GSK lack transparency which made it exposed to the fines from regulatory bodies.

Ethical Consideration

GSK faced challenges in performing its ethical duties to make decisions in the best interest of shareholders. It is an ethical duty of the company to act in the best interest of stakeholders with objectivity and integrity. The board of directors are the agent of shareholders and therefore obliged to act in their best interest which GSK board failed to do so.

Accountability

With greater responsibility comes greater accountability. A listed company has a greater responsibility as compared to the unlisted company as it exposed itself to the public. GSK face issues in terms of the accountability of its actions which resulted in the bad ranking. From the executives to the employees, a listed company’s members are accountable for their actions to the shareholders and the public.

Corporate Governance in Listed Company vs Privately Owned Company

Corporate governance is an essential system for the listed companies as with listing on stock exchanges the company exposed itself to the public in response of which it has to make transparent and timely disclosures of its financial and major decision to the shareholders. Being a listed company, accountability, transparency, integrity, and compliance with regulatory bodies are an essential element the company is supposed to follow. However, the privately owned companies are not bound to act in accordance with their principles of regulatory body. It has corporate governance system for its self-satisfaction and for the better performance of the company.

Further, the registered companies enjoys the benefit of equity funding and are more trusted by the common public and the investors to invest in the company. However, the privately owned companies find it difficult to raise funds for their investments.

Recommendation

The GSK Company is facing challenges with respect to its corporate governance. The good corporate governance reflects the objectivity, integrity, sense of responsibility, transparency, and in dependency. Thus GSK Company is supposed to enhance its corporate governance system by firing managers and employees who discourage the transparency in reporting, hiring executives and managers who possess strong ethics, and encourage the in dependency within the board of the company. Also the company need to enhance its reporting and transparency to the shareholders so that investors trust the company for their investments by encouraging the corporate governance practices within the organization.

Conclusion

Being a listed company, the managers are liable and accountable for their actions to the shareholders (i.e. the owners of the company) as the wealth and income of the shareholders can be compromised or enhanced by the actions of management. Moreover, the existing shareholders and the potential shareholders take their investment decisions on the information available in the annual reports. Therefore, the managers are accountable for their actions because of the trust, the shareholders place on the managers and expect them to provide timely and accurate information, to act ethically, and to manage the associated risk.

Appendices

Appendix-1 Challenges faced by GSK Company

 

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