Analysis and Synthesis of Data and Information

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Section 1: Overview of company data and information that pertains to governance

Microsoft company mission cornerstone is founded on empowerment. To realize the mission, Microsoft provides quality products and services to customers to enable them realize great things. Besides, its mission demands accountability to customers, shareholders, business partners and employees. Also, the mission requires thoughtfulness on effects to business policies, practices and investment in the society. In Microsoft, good corporate governance fosters transparency and accountability. The firm’s board constitutes four committees that performs oversight responsibilities. Corporate governance is a set of rules, regulations, policies, practices, and processes by which a firm or a company is controlled and directed. Marrewijk (641) adduced that corporate governance balances interests of various stakeholders. The concept provides a framework for achieving firm objectives. There exist multiple players that directly or indirectly affect corporate governance. In this context, the paper will focus on three Microsoft players; board of directors, corporate social responsibility concerns and financial players and investment advisers.

Section 2: Analysis and synthesis of data and information

How the players affect the development and maintenance of governance for the firm

Board of directors

The board of directors is a basic, direct and pivotal player or agent that influences corporate governance at Microsoft. The directors are appointed by the company’s shareholders or by the board members to represent the shareholders of the firm. According to Cressy (117), the players are expected to make vital decisions such as appointment of corporate officers, divided policy decisions as well as executive compensation. In some circumstances, the board of directors’ tasks surpasses financial optimization where shareholders call for social concern. The board is often comprised of independent and inside members. The insiders are made up of executives, founders and major shareholders. The independent members do not have any links to insiders but are appointed owing to their knowledge, skills and managing experience. The independent members are crucial for governance and assist in synchronizing shareholders interest with those of the insiders. Apart from the above mentioned general tasks, Microsoft’s board of directors is responsible for selecting the CEO. Besides, the board ensures existence of strong risk management to handle unforeseen contingencies (Cressy 118).

Corporate social responsibility (CSR) concerns

Allan (130) defined CSR as a way in which a firm or a company generates and uses its resources to offer customers goods and services of value that are superior to those that competitors provide in order to maximize profit. The society for ecological restoration (SER) adopted the methodology of CSR, and highlighted specific applications in various policy areas. The idea of adopting corporate social responsibility concept purposed to reflect closely forces like reputation. Separating CSR and corporate governance is impossible since firms have generated a good sense of CSR by paying close attention to their underlying values that will help them develop a healthy relationship with their customers (Enquist 189). CSR improves Microsoft corporate business activity and the corporate culture which is sustainable in these three aspects. Besides, the concept of corporate social responsibility is applied in Microsoft’s marketing strategies and customer retention processes (Enquist 189).

Corporate social responsibility is seen as a sound investment. According to the theory of sound investment, the stock market reacts to a company’s activities hence making the market to reward socially responsible demeanors. Also, it is viewed as a conscious element of Microsoft’s operations on a long-term basis in three aspects: economic, social and environmental as well as ecological dimensions. The three dimensions are also referred to as bottom lines. Enquist (190) argued that it is necessary to have a balance in the three dimensions while running a business. Marrewijik (642) looked at the triple bottom line from a different perspective; people, planet and profit- that is three Ps. Marrewijik’s perspective is not too different from the above-outlined bottom lines - financial, economic and environmental. Notably, it points out to the reality of doing business. To make the profit, businesses must consider everyone involved such as its employees and the community. As such, the firm should not contribute to our planet’s degradation since it contains resources for upcoming generations.

Financial planners and investment advisers

At Microsoft, financial planners and financial advisors provide wealth and financial services for their respective firms. The services include cash flow analysis and budgeting, planning on taxes and insurance, investment management, risk management among others. However, not all advisors provide all of the said services or if they do, they are not experts in all such fields (Handley‐Schachler 624). The investment advisors are necessary for Microsoft to manage the firm’s investment portfolio. The investment advisor’s tasks include; allocation of proper assets, stock or fund selection, considering assets location and risk tolerance. The investment advisors prepare and provide the firm’s performance report to instill awareness about how much money the company has and its current condition. Financial planners enable Microsoft to develop the strategy encompassing all the areas that involve finance (Handley‐Schachler 625).

Reasons for player’s selection

There exist various reasons behind selection of these three players, that is, board of directors, corporate social responsibility and financial planners and investment advisors. To begin, every firm has a goal to achieve. The players help in outlining and setting such goals. For instance, in reference to Handley‐Schachler (625), financial planning helps the firm in determining long and short-term financial goals and developing a balanced plan to achieve the targeted goals. Indeed, financial planning is viewed as a long-term strategy for managing finances wisely. Moreover, CSR is of essence in ensuring that Microsoft meets set goals in developing the firm’s public image and reputation. The excellent reputation is integral for Microsoft to realize stipulated goals. Equally, the board of directors takes part in goal setting and overseeing Microsoft executive management towards implementation of various strategies to meet its goals.

Despite the relationship between the three players, their selection was considered since the three serve as agents and fundamental components of corporate governance at Microsoft. The board of directors is vital in enacting Microsoft’s strategic decisions. The players also control the hiring process as well as oversee senior executives. Hence, without the board of directors, Microsoft would not be properly controlled. CSR is also a primary player in Microsoft’s corporate governance. CSR contributes to conserving the surrounding environment and directing charitable undertakings to the community. Microsoft thus gains unmatched reputation. Financial planners and investment advisors are equally necessary for Microsoft’s corporate governance. Microsoft requires financial management to drive the culture of profit making (Handley‐Schachler 627). Also, investment advisors are essential to offer advice on when, where and how to invest without losses.

Where do the players have common and conflicting issues in their governance approach?

The three players share common interests towards the company. Among other roles and responsibilities of the three players (board of directors, corporate social responsibility and financial planners and investment advisors) mentioned above, additional tasks include profit maximization. The three players share a common focus of maximizing the company’s profits and increasing shareholder’s dividends. Further, the board of directors oversees the manager’s plans in acquisition and management of finance toward achievement of firm’s goals (Handley‐Schachler 629). Similarly, investment advisors prepare performance reports regarding finance. Thus, board of directors, financial planners and investment advisors collaboratively monitor Microsoft financial issues closely. The board of directors and financial planners control daily company affairs through money and business management. Additionally, the board of directors and senior financial planners monitor senior executives’ performance.

Contrastingly, various conflict issues arise among the three players in their governance approach. First, Roberts (110) acclaimed that CSR-conflict emerges between insiders and other shareholders. The insider members of board of directors seemingly hold a perception that CSR activities may lower the company’s value. However, it is argued that good corporate governance goes hand in hand with enhanced corporate social responsibility. Notably, low expenditure on CSR spurs positive contribution towards company value. However, marginal effect of an additional unit of money for CSR expenditure would lower or decrease shareholders’ wealth since usually, firms do not set limits to amount a company can transfer to its stakeholders. However, as a hypothesis, Microsoft’s insiders (corporate managers, directors and major block holders) may hold intentions to raise CSR expenditure to a higher level than that which maximizes the company’s value. For instance, a favorable CSR rating can improve insiders’ reputation as individuals who value and respect their employees, environment and the community. Therefore, in the instance where high CSR expenditure benefits the firm insiders (affiliated shareholders), other non-affiliated shareholders may not detect a high CSR expenditure if the company value’s drops. Consequently, CSR may generate conflict between various shareholders. Also, if non-affiliated shareholders record any private benefit for insiders, the ownership fraternity should play a vital role in setting the CSR expenditure amount (Preuss 880).

The board of directors’ oversight role spurs a fundamental tension among the board-senior executive relationship. Most often, experts fail to understand who usually is in charge of oversight. There are no outlined firm guidelines that explain where the board oversight leaves off and the senior executive management kicks off. Preuss (881) explained that in this management area, struggle for authority and power surfaces. Some of the symptoms that may indicate board-executive conflict in Microsoft include;

Symptoms

Executive director perspective

Board member’s view

The board is not satisfied with most of my undertakings.

The executive director defends himself when I inquire about anything.

The board chair does not recognize my power.

The executive director does not recognize my power.

If the board chair continues sending me those nasty emails, I will quit.

If the executive director does not stop sending me those nasty emails, I will quit.

I cannot even purchase simple office equipment without the board chair wanting to get involved.

The executive director does not allow us to exercise our oversight duty.

Depending on conflict origin, various approaches are utilized in solving the board-executive feud. The first includes outlining the board’s oversight responsibilities properly and developing strategies and mechanisms that allow board members to fulfill their duties. The second strategy includes discussing where the firm is headed and the type of management needed to move to the next level. Further, there should be an agreement on what the executive manager will be held accountable for and how the figureheads will be evaluated. The last phase entails managing and solving interpersonal conflicts and differences.

What ethical issues stand out the most strongly for your chosen agents?

Ethics is a study that deals with right or wrongdoings for a given circumstance. Corporate governance ethics is an evaluation of ethical challenges that emerge in a business environment. According to Cressy (119), the ethical issue applies to all aspects of running a business, such as employees’ conduct and the entire company’s business. Certain ethical problems spur dilemmas and contradictions. The following are some of the ethical issues cited as outstanding for the above-chosen players.

The first include moral rights among a company and stakeholders. Notably, it is justifiable that to make sure stakeholders are contended, Microsoft might engage in unethical activities such as manipulating accounts to display higher profits and reduce number of employees to denote higher earnings. Cressy (119) decreed that misleading financial information ranks as another ethical problem in corporate governance. The firms may disclose wrong or manipulated financial statements to make shareholders happy, hoping to mend and improve the financial status in future. In this case, financial planners and board of directors can give incorrect financial information to cover the current situation (Cressy 120).

Another outstanding ethical issue that may crop up in Microsoft’s corporate governance touches on executive remuneration (Cressy 120). In many instances, executives enjoy huge salaries said to be even beyond profits obtained by shareholders. CEOs increase salaries without considering the shareholders’ returns. The question that arises regarding the ethical issue is on why shareholders pay huge salaries to executives who may not have executed their duties properly during the period when the firm failed to perform well. Hence, it is important for executives to drive the firm in the shareholder’s best interest.

How does agency theory enter into the relationship?

Even though corporate governance is a recent phenomenon in the global market, theories linked to its development have been developed. Such arise from various disciplines. Among the paradigms include agency and stakeholder theories. According to Mallin (21), the agency theory outlines the agency relationship where one party, that is, the principal, delegates work to another party, the agent. Regarding theory application, good governance should move towards maximizing shareholder’s resources. The agency theory inclination to corporate governance is evident in the United States since corporate governance is premised on public corporations with company shareholders being the principal and director the agent.

Section 3: Conclusion with recommendations for managers including how and why to use information for decisions

Notably, it is recommended that executive managers should foster distinction between their assigned roles and board member responsibilities to avert a likely conflict that would emerge following overlap of duties. Managers should concentrate on adding the firm’s value rather than the board’s oversight duty. Besides, the figureheads should ensure that insider board members do not increase CSR expenditure for personal gains. Summarily, the concept of corporate governance involves policies and processes applied in controlling and directing a corporate body. The study has analyzed three Microsoft players; board of directors, corporate social responsibility and financial planners and investment advisors. Notably, there exist various players affecting development and maintenance of a company. The corporate governance is linked to agency theory.

Works Cited

Allan N., et al. "New Conversations on Business Models." Academy of Management Proceedings, vol. 2014, no. 1, 2014, p. 130.

Cressy, Robert. "Entrepreneurship, Governance and Ethics." Journal of Business Ethics, vol. 95, no. S2, 2010, pp. 117-120.

Enquist, Bo. "Adoption of Corporate Social Responsibility – Incorporating a Stakeholder Perspective." Qualitative Research in Accounting & Management, vol. 3, no. 3, 2006, pp. 188-207.

Handley‐Schachler, Morrison. "Corporate Governance in the Financial Services Sector." Corporate Governance: The international journal of business in society, vol. 7, no. 5, 2007, pp. 623-634.

Mallin, C. "Corporate Social Responsibility." Edward Elgar, 2009.

Preuss, Lutsz. "Corporate Social Responsibility." Encyclopedia of Corporate Social Responsibility, 2013, pp. 579-587.

Roberts, John. "Corporate Governance and the Ethics of Narcissus." Business Ethics Quarterly, vol. 11, no. 1, 2001, pp. 109-127.

Marrewijk, M van. "Concepts and Definitions of CSR and Corporate Sustainability: Between Agency and Communion." Citation Classics from the Journal of Business Ethics, 2012, pp. 641-655.

Appendices

Three dimensions

of corporate social

responsibility.

January 19, 2024
Category:

Business

Subcategory:

Corporations

Subject area:

Company

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2418

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