Relationship Between Corporate Governance And Strategic Planning

927 Words 4 Pages
Corporate Governance and Strategic Planning
Edwin Romero
Ashford University
BUS 690: Business Strategy
Dr. David Kalicharan
December 15, 2014

There is a relationship between corporate governance and strategic planning, as corporate governance deals with compliance and protects the organization from unethical practices. Corporate governance manages the strategic planning of organizations by giving the structure and framework to leadership in organizations to adhere to regulatory laws. Corporate governance allows for the strategic plan of organizations to make them clandestine in their financial operations by establishing rules to disclose their financial standing. By doing so, the leaders are able to plan the future
…show more content…
The strategic formulation does not influence the corporate governance. The corporate governance had become mandatory after experiencing the collapses of great organizations like Enron, Tyco and WorldCom etc. The corporate governance is developed by the top management by considering the external environment and legal rules. An example is the mandate for business firms in the United States to disclose financial statements through annual and accounting reports. The board of directors is a group of elected individuals whose primary responsibility is to act in the owners’ best interests by formally monitoring and controlling the corporations’ top-level managers (Pearce & Robinson, 2010). Furthermore, boards not only serve a monitoring role, but they also provide resources to firms. These resources include their personal knowledge and expertise as well as their access to resources of other firms through their external contacts and …show more content…
After the incidents like Enron, Countrywide Financials, and WorldCom, the government had decided to develop mandatory rules and regulations for controlling financial transaction in business organizations. It is observed that executives in powerful positions are able to divert the funds and causing troubles to the investors and shareholders of the business. Therefore, following the guidance of corporate governance, such risks are minimized. Corporate governance sets any firm or organization in the right direction and deters them of unethical practices. Before 2002, corporate governance in the United States were not enforced, which allowed major corporations to not be open with their financial reporting causing the issues of Enron, Countrywide Financials, Etc. It wasn’t until 2002 when the U.S. Congress enacted the Sarbanes-Oxley (SOX) Act, which increased the intensity of corporate governance mechanisms. This act avoids incidents like Merrill Lynch executives were paid bonuses even after the poor performance the company. Now firms and organizations by law need to be clandestine with their financial statuses and reports, protecting stakeholders and the

Related Documents