- Corporate governance
- Introduction
- The standard chartered bank was founded back in 1969. The bank was formed as result of merger of two separate banks the Standard Bank of British of South Africa and the Chartered Bank of India. The bank operates in various countries serving million of customers. The bank serves as one of the best basis of studying the importance of corporate governance in an organization. This is because the management of the bank has committed some effort towards ensuring that they achieve their growth strategies. This report therefore highlights the importance of corporate governance in an organization. In addition, the report first analyses the criteria that is used in the reviewing the corporate governance in an organization. Moreover, the report also highlights the importance of the application of the principles of corporate governance. The report also provides a review of the bank corporate governance. Most importantly the report also highlights various recommendations that the management of Standard Chartered Bank needs to implement in order to improve on their corporate governance.
- Importance of organization corporate governance
- Corporate governance plays various critical roles in an organization. First, corporate governance help to protect and facilitate the exercise of shareholders rights. This in turn helps to ensure that the shareholders are able to monitor how the board exercises its mandate. Second, effective corporate governance help to ensure that there is timely and accurate disclosure of information regarding different aspects of organization (Ferrell, Fraedrich & Ferrell, 2011). It is also evident that effective corporate help to encourage active participation of the shareholders in the management of the company. Another importance of effective corporate governance is the fact that it helps to promote equitable treatment of all shareholders. Most importantly the corporate governance helps to promote and efficiency in the management since it promotes the rule of the law.
- Criteria for reviewing organization corporate governance
- The corporate governance refers to the various ways in which a corporation policies itself. Moreover, the corporate governance also involves the ways in which a bank initiates its own customs, laws and policies to its employees. One of the major purposes of corporate governance is to improve the accountability in an organization and therefore help in ensuring that an organization achieves its set objective. Corporate governance should also help to promote efficient market and most importantly help in promoting rule of law and articulate clear division of responsibility among different management levels in an organization. Various issues and concerns related to the corporate governance should always be discussed in open discussions. The following are some of the criteria that can be used to review the organization performance.
- Transparency
- Transparency in an organization mainly refers to how easy the outsiders can easily analyze the bank various financial and non-financial information (Lipman & Lipman, 2006). In regard to this it is important for management of the bank disclose all materials and information with quality standard of financial and accounting. Moreover, in order to promote transparency in an organization an external firm should carry out the annual audit. This audit should include the issues regarding the employee and other stakeholder in an organization. Most importantly the annual report should also indicate the bank governance structures and policies.
- Shareholders rights
- The shareholders rights are other criteria that can be used to review organization corporate governance (Grandori, 2006). In relation to this an organization must ensure that they first it lay secure ownership registration strategies. The shareholders must also be in a position to acquire relevant information on various issues related to the corporate governance. In addition, the management must ensure that they share the bank profit is proportionally distributed among the shareholder. It is also evident that the management must ensure that they allow the members to that the shareholders elect the board of director. The shareholders in an organization also have the right to be informed on any changes that the management intends to undertake regarding the bank affairs. Most importantly the shareholders should be given an opportunity to participate in the annual general meeting. In relation to this the management of the bank should ensure that they explain to the shareholders the rules and the procedure used in the annual general election.
- Equitable treatment of the shareholders
- The degree of equitable treatment of the shareholders should also serve as the criteria of assessing the application of good corporate governance. In relation to this the management of an organization needs to ensure that all the shareholders of the same class are treated equally (Mallin, 2007). This implies that the shareholders of the same class should be given the same rights to vote. In addition, the shareholders of the same class should also have the idea of the voting procedures. This is to help ensure that the bank embraces the practice of free and fair methods of conducting elections. It is also important for the members of the board to ensure that they avail any information to the shareholder in the same class in equal basis. The management should ensure all the shareholders understand the entire voting and tallying process. In order to ensure that an organization uphold the principle of equity it is important for the management to ensure that they give the shareholder their right to initiate legal and administrative proceeding against the management or the board. However, it is also important for the management to ensure that the interest of the minority shareholders is protected from the abusive action from the majority shareholders.
- Role of the stakeholders in the corporate governance
- The corporate governance in an organization should recognize the rights of all the stakeholders. This therefore implies that in well-managed organization the management should ensure that they protect all the rights of the stakeholder. In addition, in a well managed corporate the management should ensure that they permit a performance enhancing mechanism where the stakeholders are free to participate. In the situation where the stakeholders participate in the corporate governance they should equally have access to all the relevant information they need to acquire in an organization. Moreover, it is also important for the management to ensure that they give the stakeholder an opportunity to communicate their concern on illegal or unethical practices from the board. In relation to this, the management needs to ensure that the employees are not compromised when they raise issues related to unethical practice in the management. In addition, it is also important for the board to ensure that they respect even the shareholders law, which is established through mutual agreement. The corporate governance also plays an important role in promoting performance-enhancing mechanism of employee participation in the management. In this case, the management should ensure that there is adequate employee participation in some of the bank management activities.
- The responsibility of the board
- The board of directors plays a significance role in ensuring that an organization achieves its objectives. Most importantly the board of directors is also actively involved in the corporate governance. In relation to this the board of directors needs to act in good faith and in the best interest of the organization. When making various decisions the board needs to ensure that all the shareholders equally. The board should also ensure that they comply with the various laws that in the shareholders management. The board also has a responsibility of ensuring that they review on the guiding corporate strategies and the major plan of action. In addition the board of director has the responsibility of selecting, monitoring and overseeing the succession plans. Most importantly the board of director needs to ensure that they maintain the integrity of the corporation accounting, and of the various financial transactions. Moreover, the board should also be committed in monitoring of the governance practices that they execute. However, in order to ensure that the board executes their responsibility effectively it is important that they be provided with accurate and reliable information regarding different aspects in the bank administration.
- Review of the standard charted
- The following are some of the documents and issues that can be used to explore the management of the bank and the issues related to the corporate governance.
- Constitution
- The Standard Chartered Bank adheres with the requirement in the Australia constitution. First the management of the bank recognizes equality and human dignity in their operation. In regard to this the bank follows a formal and selection and recruitment procedure when hiring its staff. Second, the management has also adhered to the various labor laws and regulation that govern labor movements. Most importantly the management and the board have responsibility of abiding to the various codes of ethics related to the banking industry.
- Memorandum and articles of association,
- The memorandum and article of association highlights some of the basic issues in the management. First, the article highlights the requirement of a person to become the shareholder of the company. In relation to this the article stipulates that the one must first be of legal age in order to become the shareholder of the company. The article also highlights requirement of the member in order to participate in the election voting. It is also stipulates the procedure of voting and tallying of the result. The article also stipulates the condition that can make a person loose his or her shareholder membership. In addition the article also highlights the responsibility of the board of directors as well as the management. It is also worth noting that the article also highlights the requirement for one to become be appointed to the board of director.
- Governance structure
- The standard chartered bank has a board of director that leads over 89,000 staff. The board has the prime responsibility of providing leadership through ensuring that the bank follows a certain strategic direction. There are six-board levels committees each board with a certain role and responsibility (http://investors.standardchartered.com/en/committees.cfm). First, there is the audit board that is involved in reviewing and monitoring the appropriateness of the statutory account, published financial statement and the various circular to the shareholders. The audit committee is also involved in ensuring that the financial reporting functions adequately. The brand and value committee has the responsibility of indentifying and managing the company reputation. This board also helps in overseeing the way the group approaches the regulatory relationship. Other board committee includes the remuneration, nomination, governance and the scheduled matters reserved for the board. The top management of the company constitutes of the chairperson, group chief executive, finance director, executive director, independent non-executive and director group of company director among others.
- Annual reports
- The annual report of 2011 showed that the consumer banking grew by 26% to over $1.6 billion. The wholesale banking delivered a profit of $5billion, which was great improvement from the previous year. It was also evident that the bank was able to provide to the small and the medium sized enterprise with credit worth. The income of the company also rose by 10% this in turn facilitated the increase of the dividend earning of the share to about 76 cents per share. Despite the continued growth the executive manager also highlighted that the company was experiencing some challenges especially in the wholesale banking (http://reports.standardchartered.com/ar2011/corporategovernance/boardofdirectors.html?cat=m). One of the challenges that the bank experienced was mainly related to the increased government levy. The group executive manager also highlighted the company brand is one of the greatest asset and therefore there was need for the group board of management to ensure that they protect it.
- Recommendation
- The bank needs first to improve on the transparency in their management. Improving the transparency in the organization can help to ensure that the investors gain trust in the management of the organization (Rittenberg, Johnstone & Gramling, 2010). In relation to this, the management needs to ensure that they provide various stakeholders information regarding various banks operations. This therefore implies that the management must ensure that they notify the stakeholders all the actions they intend to undertake. This can in turn help to ensure that all the stakeholders understand the various goals and objectives of the company. Most importantly improving transparency can also help to promote honesty and open communication in the organization
- Moreover, the management of the bank also needs to improve on the shareholders rights (Lipman, 2006. This can helps to ensure that the shareholders are able to hold the management of the bank in the most accountable ways. In addition improving the shareholders rights can help to ensure that they are able to contribute in the management of the various bank activities. Another critical area that the management of the bank needs to improve is the issues related to the equity ownership disclosure. This can in turn help to ensure that the all the stakeholders understand the ownership structure of the company. Promoting equity ownership in the bank can also help to improve on transparency in the management.
- The management of Standard Chartered Bank also needs to improve on their risks assessment program. In relation to this, the management of the bank must ensure that first factor in the threat that might be posed by the entry of new entrants in the industry (Segal, 2011). This can in turn help to ensure that the management develops measures to counter such risks. Second the management must ensure that they assess the risk that might be posed by substitute products. The management must also ensure that they analyses the various risks that are posed by the rival banks in the industry. It is also evident that the board of directors must ensure that the implement various strategies to help in protecting their brand. This is because the brand of the bank is the most important asset. Protecting the brand can also help to ensure that the bank is able to achieve its growth strategies.
- Conclusion
- From the above it is evident that corporate governance plays a critical role in the management. This is first it is involved in the promoting of transparency in an organization. This in turn help to ensure that the all the stakeholders are supplied with information regarding the bank financial transactions. Moreover, corporate governance helps to ensure that the rights of the shareholders are protected as stipulated in the law. Protecting the shareholders rights also helps to ensure that they are able to raise any issue related discrepancy in the management. Another critical function of the corporate governance is the fact that it helps to promote equitable treatment of the shareholders. In relation to this, good corporate governance help in ensuring that the rights of the minority shareholders are also protected. In addition, it is important with improved corporate governance management of Standard Chartered Bank can help to improve the performance of the company. This can therefore help to ensure that the bank is able to increase on its market share both in the local and in the international market.
- Reference
- Ferrell, O. C., Fraedrich, J., & Ferrell, L. (2011). Business ethics: Ethical decision making and cases. Mason, OH: South-Western Cengage Learning.
- Grandori, A. (2006). Corporate governance and firm organization: Microfoundations and structural forms. Oxford: Oxford University Press.
- Lipman, F. D., & Lipman, L. K. (2006). Corporate governance best practices: Strategies for public, private, and not-for-profit organizations. Hoboken, N.J: Wiley.
- Mallin, C. A. (2007). Corporate governance. Oxford [u.a.: Oxford Univ. Press.
- Rittenberg, L. E., Johnstone, K. M., & Gramling, A. A. (2010). Auditing: A business risk approach. Mason, OH: South-Western Cengage Learning.
- Segal, S. (2011). Corporate value of enterprise risk management: The next step in business management. Hoboken, N.J: Wiley.
- http://investors.standardchartered.com/en/committees.cfm
- http://reports.standardchartered.com/ar2011/corporategovernance/boardofdirectors.html?cat=m
- http://investors.standardchartered.com/en/governance.cfm
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