Ethics very legalistic in the sense that codes,

Ethics and its Roles in
Corporate Governance

 

Introduction

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In this paper we will study the role of ethics in the
context of corporate governance system. The corporate governance is defined as
a structure and process that guide companies into achieving the necessary high
standards of corporate behaviour. On the other hand, Fisher (2004) defines the
ethics as a means of doing the right thing. The nature of the corporate
governance is very legalistic in the sense that codes, guidelines and
regulations are put in place to oversee corporate governance. compliance, the
moral aspect is argued by many to be absent or limited. provide an overview of
corporate governance outside the scope of financial performance. This research
paper aims to establish a basis for the further exploration of corporate
governance from a behavioural perspective by moving research agendas toward a
wider scope in the examination of corporate governance issues. We will study
the role of ethics in the context of corporate governance system. The corporate
governance is defined as a structure and process that guide companies into
achieving the necessary high standards of corporate behaviour. On the other
hand, Fisher (2004) defines the ethics as a means of doing the right thing. The
nature of the corporate governance is very legalistic in the sense that codes,
guidelines and regulations are put in place to oversee corporate governance.
moral aspect is argued by many to be absent or limited. In this paper we will
explore the experts’ perceptions of the role of ethics in the context of
corporate governance also we will provide an overview of corporate governance
outside the scope of financial performance. This research paper aims to
establish a basis for the further exploration of corporate governance from a
behavioural perspective by moving research agendas toward a wider scope in the
examination of corporate governance issues. We will study the role of ethics in
the context of corporate governance system. The corporate governance is defined
as a structure and process that guide companies into achieving the necessary
high standards of corporate behaviour. On the other hand, Fisher (2004) defines
the ethics as a means of doing the right thing. The nature of the corporate
governance is very legalistic in the sense that codes, guidelines and
regulations are put in place to oversee corporate governance. Corporate
governance is constructed by focusing on legal processes and structures to
ensure compliance, the moral aspect is argued by many to be absent or limited.
This research paper aims to establish a basis for the further exploration of
corporate governance from a behavioural perspective by moving research agendas
toward a wider scope in the examination of corporate governance issues.

Literature Review

Corporate governance theoretical developments focused upon
economics, emphasising the financial benefits of corporate governance. Agency
Theory emphasizes financial benefits as the ultimate focus of corporate
objective. Later other theories came into the picture like governance theories
focussing on maximizing the wealth as the objective of corporations. Agency
Theory emphasizes financial benefits as the ultimate focus of corporate
objective. Later other theories came into the picture like governance theories
focussing on maximizing the wealth as the objective of corporations. The
framework of corporate governance is understood as a system of structures and
processes to achieve economic gain i.e., financial benefit. There are several
indicators to evaluate corporate governance compliance such as board structure,
audit, board of directors, CEO duality, role of individual investors, ownership
structure and role of audit committee. The framework of corporate governance is
understood as a system of structures and processes to achieve economic gain
i.e., financial benefit. There are several indicators to evaluate corporate
governance compliance such as board structure, audit, board of directors, CEO
duality, role of individual investors, ownership structure and role of audit
committee. The phenomenon of corporate governance tells us that high level of
compliance does not necessarily reflect good governance like Enron, for
example, provides a good case. Corporate governance theoretical developments
focused upon economics, emphasising the financial benefits of corporate
governance. Agency Theory emphasizes financial benefits as the ultimate focus
of corporate objective. Later other theories came into the picture like
governance theories focussing on maximizing the wealth as the objective of
corporations. Agency Theory emphasizes financial benefits as the ultimate focus
of corporate objective. Later other theories came into the picture like
governance theories focussing on maximizing the wealth as the objective of
corporations. The framework of corporate governance is understood as a system
of structures and processes to achieve economic gain i.e., financial benefit.
There are several indicators to evaluate corporate governance compliance such
as board structure, audit, board of directors, CEO duality, role of individual
investors, ownership structure and role of audit committee. The framework of
corporate governance is understood as a system of structures and processes to
achieve economic gain i.e., financial benefit. There are several indicators to
evaluate corporate governance compliance such as board structure, audit, board
of directors, CEO duality, role of individual investors, ownership structure
and role of audit committee. The phenomenon of corporate governance tells us
that high level of compliance does not necessarily reflect good governance like
Enron, for example, provides a good case.

Methodology

We did a qualitative study to answer the question put
forward in this case study. The qualitative study identifies issues without
being constrained by predetermined categories, while contributing to the depth
and detail of the enquiry. The study is best suited for in-depth exploration of
ideas relating to ethics and corporate governance. With keeping in mind, the
requirements for qualitative enquiry, selection of experts and the data
collection processes were designed. Data credibility is supported by the
thorough selection of respondents, comparing responses between samples, use of
multiple techniques (interviews and documents), rigour in analysis process, use
of quotations, linked words to emergent theory, member check and peer check. We
validated our research by thorough research design employed by other
researchers. The qualitative study identifies issues without being constrained
by predetermined categories, while contributing to the depth and detail of the
enquiry. The study is best suited for in-depth exploration of ideas relating to
ethics and corporate governance. With keeping in mind, the requirements for
qualitative enquiry, selection of experts and the data collection processes
were designed. Data credibility is supported by the thorough selection of
respondents, comparing responses between samples, use of multiple techniques
(interviews and documents), rigour in analysis process, use of quotations,
linked words to emergent theory, member check and peer check. We validated our
research by thorough research design employed by other researchers. The
qualitative study identifies issues without being constrained by predetermined
categories, while contributing to the depth and detail of the enquiry. The
study is best suited for in-depth exploration of ideas relating to ethics and
corporate governance. With keeping in mind, the requirements for qualitative
enquiry, selection of experts and the data collection processes were designed.
Data credibility is supported by the thorough selection of respondents,
comparing responses between samples, use of multiple techniques (interviews and
documents), rigour in analysis process, use of quotations, linked words to
emergent theory, member check and peer check. We validated our research by
thorough research design employed by other researchers. The major validation
was in making sense of the association between ethics and corporate governance
where ethics and its role in relation to corporate governance was deliberated
in three perspectives. Therefore, the research findings give an understanding
and meaning of the role of ethics in corporate governance from the social
reality context.

Finding and Discussion

After analysing the data, we understand that experts
perceive ethics in business playing a crucial role in today’s world and they
highlighted that ethics should be made a priority in governance. Perception of
the experts on ethics is the moral obligation that guides corporate behaviour. “Ethics
is described as a conduct of doing the right thing and able to generate aspects
of corporate moral obligations”. According to the view of experts, ethics is
the foundation on which the obligation of doing the right thing and achievement
towards wealth maximization are carried out in an accountable, transparent and
responsible manner and that supports the long-term sustainability of
corporations. After analysing the data, we understand that experts perceive
ethics in business playing a crucial role in today’s world and they highlighted
that ethics should be made a priority in governance. Perception of the experts
on ethics is the moral obligation that guides corporate behaviour. “Ethics is
described as a conduct of doing the right thing and able to generate aspects of
corporate moral obligations”. According to the view of experts, ethics is the
foundation on which the obligation of doing the right thing and achievement
towards wealth maximization are carried out in an accountable, transparent and
responsible manner and that supports the long-term sustainability of
corporations. After analysing the data, we understand that experts perceive
ethics in business playing a crucial role in today’s world and they highlighted
that ethics should be made a priority in governance. Perception of the experts
on ethics is the moral obligation that guides corporate behaviour. “Ethics is
described as a conduct of doing the right thing and able to generate aspects of
corporate moral obligations”. According to the view of experts, ethics is the
foundation on which the obligation of doing the right thing and achievement
towards wealth maximization are carried out in an accountable, transparent and
responsible manner and that supports the long-term sustainability of
corporations. After analysing the data, we understand that experts perceive
ethics in business playing a crucial role in today’s world and they highlighted
that ethics should be made a priority in governance. Perception of the experts
on ethics is the moral obligation that guides corporate behaviour. “Ethics is
described as a conduct of doing the right thing and able to generate aspects of
corporate moral obligations”. According to the view of experts, ethics is the
foundation on which the obligation of doing the right thing and achievement
towards wealth maximization are carried out in an accountable, transparent and
responsible manner and that supports the long-term sustainability of
corporations. After analysing the data, we understand that experts perceive
ethics in business playing a crucial role in today’s world and they highlighted
that ethics should be made a priority in governance. Perception of the experts
on ethics is the moral obligation that guides corporate behaviour. “Ethics is
described as a conduct of doing the right thing and able to generate aspects of
corporate moral obligations”. According to the view of experts, ethics is the
foundation on which the obligation of doing the right thing and achievement
towards wealth maximization are carried out in an accountable, transparent and
responsible manner and that supports the long-term sustainability of
corporations.

Role of Ethics in Corporate
Governance

The analysis of data gives the insightful relationship
between ethics and corporate governance. There are three main themes that
attest to the worldview related to the role of ethics in corporate governance.
Figure below depicts the perceptions of the experts related to this ethics and
corporate governance.

The first theme indicates that corporate governance is a big
code of ethics. A code of ethics is neither rules nor regulations; rather it is
a guideline perceived to be represented by the structure and process and
designed to assist corporations in resolving issues arising out of grey areas.
According to the experts, grey area are the cases of conflicting interests
faced by the corporate members. Also, “complying with corporate governance
requirement is an act of ethics”. Requirement of the corporate governance
contain values related to the key concerns of business ethics.

The analysis of data gives the insightful relationship
between ethics and corporate governance. There are three main themes that
attest to the worldview related to the role of ethics in corporate governance.
Figure below depicts the perceptions of the experts related to this ethics and
corporate governance. A code of ethics is neither rules nor regulations; rather
it is a guideline perceived to be represented by the structure and process and
designed to assist corporations in resolving issues arising out of grey areas. A
code of ethics is neither rules nor regulations; rather it is a guideline
perceived to be represented by the structure and process and designed to assist
corporations in resolving issues arising out of grey areas.

It indicates that corporate governance is a big code of
ethics. A code of ethics is neither rules nor regulations; rather it is a
guideline perceived to be represented by the structure and process and designed
to assist corporations in resolving issues arising out of grey areas. According
to the experts, grey area are the cases of conflicting interests faced by the
corporate members. Also, “complying with corporate governance requirement is an
act of ethics”. Requirement of the corporate governance contain values related
to the key concerns of business ethics. A code of ethics is neither rules nor
regulations; rather it is a guideline perceived to be represented by the
structure and process and designed to assist corporations in resolving issues
arising out of grey areas. A code of ethics is neither rules nor regulations;
rather it is a guideline perceived to be represented by the structure and
process and designed to assist corporations in resolving issues arising out of
grey areas. A code of ethics is neither rules nor regulations; rather it is a
guideline perceived to be represented by the structure and process and designed
to assist corporations in resolving issues arising out of grey areas.

The second theme gives the different perspective and
indicates that ethics is part and parcel, or a subset, of corporate governance.
“Inclusivity refers to the rules, principles, self-regulation and guidelines
inherent in a good corporate governance system”. In other words, ethics is
defined as the subset of corporate governance system and is implicitly included
in it. The issue of governance is not just a set of rules but also a control of
conduct. The control of conduct is good behaviour which is linked to ethics. Ethics
can be used to motivate corporations and corporate citizens to act in an
ethical manner. Such principles guide corporations towards good behaviour. The
issue of governance is not just a set of rules but also a control of conduct.
The control of conduct is good behaviour which is linked to ethics. Ethics can
be used to motivate corporations and corporate citizens to act in an ethical
manner. The control of conduct is good behaviour which is linked to ethics.
Ethics can be used to motivate corporations and corporate citizens to act in an
ethical manner. Such principles guide corporations towards good behaviour. The
issue of governance is not just a set of rules but also a control of conduct.
The control of conduct is good behaviour which is linked to ethics. Ethics can
be used to motivate corporations and corporate citizens to act in an ethical
manner. Such principles guide corporations towards good behaviour. The issue of
governance is not just a set of rules but also a control of conduct. The
control of conduct is good behaviour which is linked to ethics. Ethics can be
used to motivate corporations and corporate citizens to act in an ethical
manner. Such principles guide corporations towards good behaviour. Voluntary
requirements indicate that it is not just a set of rules, but also provides
guidance that corporations can follow voluntarily.

An opposing view is suggested by third theme that indicates
that ethics are not merely part of corporate governance; rather, ethics is
affiliated with the corporate governance system. In other words, ethics exist
within every individual, therefore, the creation of a good governance system
rests on the individual’s ethical conduct. According to the experts, ethics is
not externally integrated into a governance system, rather it is the values
possessed by the individual that steer the governance system. Therefore, we can
find a relationship between the individual and any system which is designed to
lead towards good governance practices. The governance system would not work
without any ethical individuals. The study highlighted here is linked with the
utilitarian principles, where the concept of greatest good for the greatest
number of people is the basis for the evaluation of rightful acts. According to
the experts, ethics is not externally integrated into a governance system,
rather it is the values possessed by the individual that steer the governance
system. Therefore, we can find a relationship between the individual and any
system which is designed to lead towards good governance practices. The
governance system would not work without any ethical individuals. The study
highlighted here is linked with the utilitarian principles, where the concept
of greatest good for the greatest number of people is the basis for the evaluation
of rightful acts.

From the study it has been found that corporate governance
and ethics are two different concepts where corporate governance is expressed
as framework of corporations while ethics is perceived in regards to conduct.

Guidelines to Good System

Ethics is a part of corporate governance. When one practices
ethical behaviour, it means one would do best in governance practices. As per
the above themes mentioned, the emphasis is on the inclusion of mandatory and
voluntary requirements which are a part of the ethical practices considered as
inclusive governance. The mandatory and voluntary requirements in the structure
and process of governance are part of the ethical measures that guide
corporations towards being accountable and transparent and which denoted the ethical
ideology inclusivity in corporate governance practices. Corporations describe
these ethical measures as either explicit or implicit. The best practices
followed in regards to corporate governance include “ethical elements, such as
compliance with laws and payments of taxes; not making inappropriate payments
or receipts; avoidance of conflicts of interest; maintaining the
confidentiality of privileged information; refusing gifts; equal opportunities;
and charitable donations” which are explicitly visible in the corporate governance
practices. Some of the moral responsibilities which are emphasized in the study
includes creating jobs; generating tax revenue; rendering goods and services to
consumers; providing secure retirement for employees; ensuring a maximum degree
of transparency; and internal and external accountability. However, the study indicates
that there is still much to be done to support ethics in corporate governance
practices as a means to enhance good governance practices. The mandatory and
voluntary requirements in the structure and process of governance are part of
the ethical measures that guide corporations towards being accountable and
transparent and which denoted the ethical ideology inclusivity in corporate
governance practices. Corporations describe these ethical measures as either
explicit or implicit. The best practices followed in regards to corporate
governance include “ethical elements, such as compliance with laws and payments
of taxes; not making inappropriate payments or receipts; avoidance of conflicts
of interest; maintaining the confidentiality of privileged information;
refusing gifts; equal opportunities; and charitable donations” which are
explicitly visible in the corporate governance practices. Some of the moral
responsibilities which are emphasized in the study includes creating jobs;
generating tax revenue; rendering goods and services to consumers; providing
secure retirement for employees; ensuring a maximum degree of transparency; and
internal and external accountability. However, the study indicates that there
is still much to be done to support ethics in corporate governance practices as
a means to enhance good governance practices.

Conclusion

The findings of this study have shown that the role of
ethics in the context of corporate governance is interpreted from three
perspectives: corporate governance as a code of ethics; ethical inclusivity in
governance; and ethics as an affiliate of corporate governance. Such findings
indicate the worldview of the social reality of ethics in the Malaysian
context. Essentially, the three perspectives contribute to the understanding of
ethics in governing corporations. The findings introduce academia to a new
perspective of corporate governance issues. The three perspectives that emerged
from the findings contribute to the need to revise and re-evaluate the present
corporate governance structure. Perhaps more structure and process should be
included to integrate ethics in the corporate governance model. For academics,
these findings provide an answer to the question of ‘what is the role of ethics
in the Malaysian corporate governance perspective?’ Much of the major research
in corporate governance has been undertaken to investigate the relationship
between corporate governance and firm performance, which relates to the
structure of the corporate governance aspects. This research considers the
social aspects of corporate governance where the scope of corporate governance
research is extended to include the behavioural aspects of governance, rather
than simply the structure aspects. This paper aims to establish a foundation
for the further exploration of corporate governance from a behavioural
perspective, thus, moving research agendas towards a wider scope of examining
the corporate governance issue. Such a move will have the potential to provide
feedback to, and guidance for, practitioners, regulators and educators. The three
perspectives that emerged indicate a different spectrum in the understanding of
corporate governance. Such a new paradigm of governance aspects introduces
researchers to new governance aspects.

In sum, the general perception is that ethics should be
‘allowed’ to guide corporate moral obligations. Furthermore, ethics in the
context of corporate governance, as perceived by some of the experts, is
crucial to educate corporations and their citizens concerning a self-reliant
governance system. The findings of this study have contributed to corporate
governance from the behavioural perspective. Because the respondents were
experts, to what extent their views on ethics and their role in corporate
governance resonate with the professional and practitioners’ views needs to be
ascertained in the future, as the motive between practitioners and
professionals may differ.

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