Corporate Governance Behind Hospitals And Medical Ethics

Unlike management, corporate governance can be defined as the basic rules and regulation by which companies are directed and controlled. Basically, in corporate governance a link is established between Board of director and shareholder/stakeholder of an organization. Both of them plays a vital role in any organization and are completely dependent on each other. Here The Board of Director includes internal management that is with in the company like finance manager, chief executive officer etc. whereas on the other hand shareholders are the investor who invest their funds in the company.

Importance

Any Business around the world requires huge amount of capital in order to grow and expand, in fact finance is the backbone for any type of organization. Therefore shareholders (investors) plays a major role by investing in the company and in return The Board of director gives confidence to their shareholders. Any investor before investing its funds in the company visualize various factors and also ask for assurance that the business will continue for a foreseeable period of time and should be financially strong with a good reputation in the market. For its sake of safety shareholders (investors) looks to the annual report and accounts of the company as it reflects the true picture and fair position of the company. Board of director reports all its accounts and financial performance to its shareholders so that in return they can invest in their company. Sometimes their may be failure in corporate governance also many high profile multi national companies including international banks cross the world collapsed due to corporate scandals out of which one was satyam, India’s fourth largest company in information technology collapsed due to manipulation of its financial accounts (over stating profits and non existing assets) over a period of time and lack of appropriate discloser requirement by the chairman (B. Ramalinga Raju) of the company without telling auditor or anyone in the company, as a result of this satyam was sold in 2009 to tech Mahindra and chairman was jailed for seven years along with nine others in the company.

Mechanism Of Governance

Successful and sustainable businesses underpin our economy and society by providing good governance mechanism where directors and companies need to build good relation along with stakeholders. Governance mechanism includes various principles such as Effectiveness, Division of responsibilities, risk and internal control and remuneration. Taking the case of Rolls Royce the world’s leading industrial technology company able to achieve its goals and success only by practicing good governance mechanism. Strong growth in profits and cash flows strengthened their balance sheet. One of the best principle they follows is Board effectiveness, they especially appoints Belinda Hudson Limited (BHL) experts only for its board effectiveness. All board members worked effectively with good skills and wealth, the communication skills among the members of board was also strong. Daily routine update of face to face interaction, telephone calls and quick decision making which also highlights the fact that their is no communication gap between the members. Due to this company gets many advantages from it like the length of service was not too long and the company able to complete its work in less time with minimum cost. Another principle on which they focus is on Audit Committee by disclosing its fair and understandable accounting policies and annual report. They also adopt IFRS 15 and various methods to identify abnormal costs which results in lack of unnecessary expenses.

There are many other key features also to practice for demonstration of good governance such as Division of responsibilities, which means that all the work should be divided equally among members of board according to their capabilities and all members should work as a team for the company rather than passing all the responsibilities to a single person.

Ethics

Basically Ethics is derived from the Greek word ‘ETHIC’ which means characters, norms or moral from the society point of view in a particular field of activity. Ethics may be viewed as the entire bodies of moral values that society views by the action of human being.

Importance Of Behaving Ethically

Over the world it is recognized that ethics is vitally important for every business and progress of any society. As behaving ethically improves public image, earns people respect and trust towards business which leads to greater success. Though earning profit is the only main motive for any business but business should also take care of its ethics, in fact profits and ethics can go together in long run. Being ethical is good for the society and environment as well, as business uses society resources for its production of good and services so in return it should be the responsibility of business to behave ethically and protect the environment. Taking the example of Enron that highlights the need for integrity in business and ethical behavior at the same time.

Legal Vs Ethical

There is a vast difference between acting legally and ethically for every business. Being legal generally includes laws which is mandatory to be fulfilled such as paying tax to government whereas being ethically includes moral values for the society like using ecofriendly machines in factories which cause less harm to the environment.

Corporate Code Of Ethics

Corporate code of ethics also called codes of conduct are generally the statements of business guidelines which reflects the behavior of sub ordinates and prevent that behavior which is unethical for the firm to some extent and plays a vital role in employees decision making.