Number of pages:
1 (Double Spaced)
Number of sources:
1
Order type:
Case Study
Category: 
Business
Academic level:
Master
Style:
APA

MINI CASE

John Park (‘Park) after many years of working as the secretary of the board of a listed private owned corporation has decided to accept an employment offer from a government organization at a senior advisory level. This government organization is the, Independent Power Distribution Board (IPDB), and has the responsibility to monitor and control oligopolies, mergers and strategic alliances in industry and for protecting the consumer against anti-competitive practices and price manipulations.

Park is aware that the IPDB has been heavily criticized in the media for poor governance practices. More specifically, the IPDB’s management has been accused for not engaging much with its stakeholders, and more often the critics are focused on the government department that provides its funding and the consumer protection groups.

John Park, in his previous position as company’s secretary of the board of the listed company, was involved in a variety of corporate governance matters, and he is aware of the importance of good governance. He considers this to be important for non-profit-making organizations as well as for companies in the private sector, although he understands that governance priorities in the IPDB should differ in some respects from those in listed companies of the private sector.

 Question: Discuss the main differences between corporate governance in a major stock market company and governance in a state-owned organization such as the IPDB

Although it is known that the corporate governance concept between Stock Market Company&State-owned organizations is same, but there are many differences between them e.g.  Goals &Objectives, Transparency, Public image/Media, Incentives, Agency issue&Accountabilitythese differences can be summarized in the table below:

 

Stock market company
(private)

 

State owned organization
(governmental)

Uses Assets to generate Wealth and high financial returns

Work for the interest of the general public and considered as non-profitable organization

Accountability:

In case of failing in achieving financial goals, targets and objectives personnel of BOD can be held accountable for their decisions and actions and sometimes can be forced to resign.

Accountability:

It takes time to hold someone accountable on failing of achieving any target.

Accountability:

In the private if something wrong happen the others can sue the company

Accountability:

Governmental organization can be sued by in most cases it is not worth it.

Objectives:

Specific and written objectives to be defined and assigned prior to establishment of the company and BOD are responsible of achieving them

Objectives:

Objectives are Written and specified prior of establishment but there is a lot of tolerance and changes.

 

Public image/Media:

Public image is necessary as the alternatives firms/companies are available in the market especially competitors.

Public image/Media:

Public image is necessary but there is no alternative for the organization as the customers need to come back again.

Agency issue:

Always considers the best interests of the Stakeholders rather than Shareholders.

Agency issue:

Consider the interests of general public, consumers and other companies in its control.

Need effective Leadership & executive management to obtain sustainability and regular profit and growth.

It requires effective leadership but they are more relaxed and it takes time to coach.

Transparency:

Transparency is a must to have sustainable growth as it will attract customers and creates loyalty

Transparency:

Not all governmental sectors are transparent

Accountability:

Accountability of the BOD to shareholders must be achieved by annual report, Audited financial statement & annual meetings and should be made accessible for all public.

Accountability:

Shall be accountable to the government providing it with annual report & to be made available to public.

Not 100% ethical as most of the companies peruse profit rather than public benefits and interests.

Concentrate on public benefits rather than profit.

Incentives:

Senior executives get incentives & rewards along with basic pay usually on yearly basis.

Incentives:

Provided only upon their effective work, productivity and their contribution and reaching their targets which might take time.

Agency issue:

No job security to the employee as they can be terminated as and when required. Blame culture

Agency issue:

It has more job security & blame culture but it takes time.

Risk management, controls, mitigation & Audits are must with annual review.

Not effective Risk management, controls, mitigation & Audits.

Well established & effective corporate governance codes applied

Not all follow the codes of corporate governance.

 

 

 

In conclusion, corporate governance codes are applied in both sectors and in ideal situation & in the books both concepts are the same, but it is not what is going on in the real life as both sectors run after their interest to achieve their goals and objectives. Moreover, both of them work based on the concept of coast effective way to achieve their goals and objectives with minimum losses and mitigating the risk to their organizations.

 

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