The Players in Good Corporate Governance: Roles & Ethical Issues

Corporate Governance & Ethics
J. Owens, Professor
West Texas A&M University

Abdulaziz AL-Hawil
26 October 2014

Purpose: The aim of this paper is to elucidate how the board directors, creditors, activist shareholders, rating agencies and security analysts are playing substantial roles in order to ensure good corporate governance while facing ethical issues to be managed.

I. Introduction

II. Board of Directors Roles & Ethical Issues.

III. Creditors and Activist Shareholders Roles & Ethical Issues
A- Introduction About Creditors and Activist Shareholders
B- Creditors Roles & Ethical Issues
C- Activist Shareholders Roles & Ethical Issues
D- Benefit Each other
IV. Rating Agencies Roles & Ethical Issues

V. Security Analysis Roles & Ethical Issues

VI. Conclusion

The Players in Good Corporate Governance: Roles & Ethical Issues

In order to have good corporate governance, we should have the right elements for that. Like a secure team which has a plan, but it still needs players to apply the plan, and every player has specific tasks. Therefore, to apply good corporate governance, players with specific tasks should be included. In this paper we will address some players who are effecting on corporate governance and helping to create good corporate governance. Before addressing those players, we should know the definition of good corporate governance. According to The Stock Exchange in Thailand, good corporate governance means that the corporation has efficient, transparent and able to audited management systems that create confidence and trust among its shareholders, investors, stakeholders and relevant parties; moreover, it adds value to the organization. Good corporate governance will be applied much better when all the members at the organization are cooperating to enhance and apply the corporate governance system in a semi-perfect way, because there is not perfect corporate governance model (Tenev; Chunlin; Loup. 2002). Therefore, this paper elucidates how the board directors, creditors, activist shareholders, rating agencies and security analysts are playing substantial roles in order to ensure good corporate governance while facing ethical issues to be managed.
Board of Directors Roles & Ethical Issues. The board of directors is not about well-dressed gentile men and women gathering money without being involved in major decisions. According to Investopedia.com the board of directors is “A group of individuals that are elected as, or elected to act as, representatives of the stockholders to establish corporate management related policies and to make decisions on major company issues. Such issues include the hiring or firing of executives, dividend policies, options policies and executive compensation. Every public company must have a board of directors (2014)”. Thus, board of directors is elected by the shareholders to represent and protect their assets, and ensure a decent return for them. However, in some European countries, the board of directors` primary reasonability is to protect the employees first; then the shareholders come second (Kennon, 2014). The board of directors is the head of the organization; therefore, the directors should present the best ethics in order to motivate the rest of the organization`s members. For instance, Deloitte.com indicates
“One of the important tools of ensuring a culture of ethics and compliance is a whistle blower policy. In its simplest form, whistle blowing involves the act of reporting wrongdoing within an organization. A whistleblower policy should be approved by the board of directors. Successful whistle blowing procedures require strong leadership from the board and senior levels of management to develop a culture in which all employees are encouraged to raise their concerns without a fear of retaliation.” (2014).
Whistleblower is one of the most important ethics that a director