discussion replies 19

Need two replies to discussion boards, each one needs to be 2 paragraphs long with an in-text citation and each needs to have an open-ended question at the end. Please write as if you are talking directly to the classmate. Please add reference at the end of each one separately, please do not add a cover page:

Question #1-Reply to Equille

Original question:

In what ways might the European approach to governance be less effective than the US approach in encouraging managers to behave more ethically?

Consider what you might recommend if you were the senior ethics officer in a multinational corporation. What principles of governance would you adopt from the European approach to implement in your company? Why?

Please reply to Equille:

Both the American and the European approach to corporate governance has seen success. The American way has been a great model for Europeans and others around the world to follow as we were the first country to really industrialize and develop such an intricate governance system. Both hold some of the most basic principles at heart, but the European way of corporate governance is a bit different, and in some ways less effective. I will try to highlight some of those ways for you all.

I feel that one of the biggest differences, and one that hampers the overall effectiveness of European corporate governance, is its lack of centralized leadership. In the United States, the board of directors serves as the vital control system of publicly traded companies (Larcker & Tayan, 2008). Most European models tend to have a large emphasis on labor, environmental and societal factors, thus taking on a stakeholder model (Larcker & Tayan, 2008). I do not necessarily think this is an awful way of doing things, but with so many influences going into the decision making, I find that it would be very difficult to come to effective solutions that satisfy everyone in a reasonable manner because everyone has a say on what is going on. That could be problematic, costing the company precious time. And we know that time is money.

Continuing on that point are the tiered models some European countries, such as the ones Germany and Denmark utilize. Separating the management and oversight functions would seem to be a decent decision, as it would seemingly help to eliminate boards from having too much power and responsibility. This is a fine way of doing things again, but I just do not agree that it is the best way of doing things. Having the roles split between two boards does not offer the type of continuity that one board decisions bring. The oversight board is a nice way to monitor the managerial board, as managers cannot manage themselves (Block & Gerstner, 2016). Since the oversight committee is separated from the day-to-day operations of the company, they lack the type of insider knowledge necessary to make proper evaluations and decisions as needed (Block & Gerstner, 2016). The oversight board is now dependent on receiving quality information from its management board to make decisions, so they are limited in effectiveness if, for any reason, their management board is subpar.

If I were to take anything from the European approach to governance would be to honor the increased visibility of stakeholders. I feel that in America, boards sometimes get wrapped up in themselves and do not take into account the many people their decisions impact. I think business works better when people feel like they have some visibility in their programs. It is miserable working under conditions where you are basically a number. Maybe that increased visibility will in turn increase work morale, which is great for productivity.

References

Block, D. & Gerstner, A. (2016). One-tier vs. two-tier board structure: a comparison between the united states and germany. University of Pennsylvania Law School. Retrieved from https://scholarship.law.upenn.edu/cgi/viewcontent.cgi?article=1001&context=fisch_2016 (Links to an external site.)Links to an external site.

Larker, D.F. & Tayan, B. (2008). Models of corporate governance: Who’s the fairest of them all?. Case Writing Office, Stanford Graduate School of Business. Center for Corporate Governance. Case #CG-11. 01.15.08.

Question #2- Please reply to Caleb

Here is the Original question:

In what ways might the European approach to governance be more effective than the US approach in encouraging managers to behave more ethically?

Consider what you might recommend if you were the senior ethics officer in a multinational corporation. What principles of governance would you adopt from the European approach to implement in your company? Why?

Please Reply to Caleb:

For this discussion, I am of the opinion that the United States is more effective than the counterparts in Europe. The most decisive fact for this argument is who has control. The American business model places the most qualified people in control of the direction of the company. “The board of directors served as the most important controlling mechanism to ensure that the management of the publicly traded corporations acted in the interest of the shareholders.” (Larker, Tayan, 2008) The board of directors provides the primary direction of the company. They are selected based on their expertise in the specific field or simple expertise in maximizing profits. Along with the selection of the board of directors is the oversight to ensure that the company is operating within the confines of the law. The NYSE requires that some board members be independent of the company as to not be compromised by bias standard of the company. Another outside influence that helps ensure that the United States maintains proper compliance is the process of having external auditors monitor policies and procedures. The company procedures, as well as financial statements, are audited. Should the company fail in being a productive or to be shown to be fraudulent than the company can be sued as a person and held to the liability.

Compare all these standards to that of Europe, countries like Germany. They do not have a specialist in their specific field making the most important decisions for the company. German national banks and insurance companies have representation on the board for German companies. Because of this, it is not always what is best for the company or profits, rather what is best for outside influences. Other countries such as Russia and Sweden, the government is heavily involved in the control and financial situation of the company. (Larker, Tayan, 2008). When comparing both major business models, the United States places the power and control of the company with those that are most invested and have the most knowledge

As for adopting a portion of the European governance part of a business model, I actually do not think it is a bad idea to have government input on the direction of the business. I know that there are several checks and balances that American businesses go through, but having an independent oversight from individuals that have no stake in the business success or failure could curb or eliminate the potential for corruption. All of this comes at a high cost, personal appointments, committees, sub-committees, etc. Most would argue that this is something that we definitely do not need more of in our governmental system.

Larker, D.F. & Tayan, B. (2008). Models of corporate governance: Who’s the fairest of them all?.Case Writing Office, Stanford Graduate School of Business. Center for Corporate Governance. Case #CG-11. 01.15.08.

 

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