Response to the following with 250 words APA style
As Hopkins explains, corporate governance can be effective at overseeing an organization from a higher perspective with real stakes that influence them to act in the best interest of the company. Corporate governance difference from non public hierarchy in the sense that CEOs of non public companies may be individual and have complete control over a companies decision making. Sometimes this can be benificial as you may not want several people steering a boat when one person knows exactly where they are going. Though on the other side of that, a individual CEO will not likely be an expert in multiple fields and may also not take the advice from their hired experts.
With a corporate structure where all stake holders have at least a monetary stake by owning shares of the company, if not more stakes such as a love for the company, its purpose and its people, the shareholders will be many and may come from a variety of backgrounds with varying expertise. With that, individual shareholders bring parts of a whole in regards to assessing risk. As there is risk in every aspect of a business, including marketing, loss prevention, business developement and all others. With each individual set to grow their share sizes they also want to ensure their share sizes don’t shrink.
One example can be taken from the recent issues within the many companies that Elon Musk has been a part of. His interactions on social media and an interview he did on the Joe Rogan podcast concerned shareholders. There was talk of him stepping down from one of his companies as the acting CEO. Whether or not you agree with this decision, it provides and interesting example of how the Corporate Governance system can act for the interests of the company at large over the interest of the individual owner.
Hopkins, P. (2017). Fundamentals of Risk Management: Understanding, Evaluating, and Implementing effective risk management. 4th Edition. London, England: Koran Page Limited
Expert Solution Preview
In this content, the author discusses the effectiveness of corporate governance in overseeing an organization and highlights its differences from non-public hierarchy. The author also mentions the benefits and drawbacks of having an individual CEO versus a corporate structure with multiple stakeholders. The example of Elon Musk’s recent issues is provided to illustrate how corporate governance can prioritize the interests of the company over individual owners.
Corporate governance plays a crucial role in ensuring the proper management and decision-making within organizations. Unlike non-public hierarchy, where individual CEOs have complete control over decision-making, corporate governance involves a system where stakeholders, who may come from different backgrounds and possess varying expertise, have a say in the company’s operations. This collective input allows for a more comprehensive assessment of risks and a broader range of perspectives.
One of the advantages of corporate governance is the ability to minimize risks by considering different aspects of the business. Shareholders in a corporate structure have a vested interest in the company, whether it be through monetary stakes or emotional attachment. This broader ownership base ensures that decisions are not solely driven by the individual CEO’s limited expertise but rather by collective input from stakeholders with diverse backgrounds. The involvement of multiple shareholders can provide a system of checks and balances, reducing the likelihood of biased decision-making.
The example of Elon Musk’s public controversies sheds light on the role of corporate governance in prioritizing the interests of the company over individual owners. Musk’s actions on social media and public statements raised concerns among shareholders, leading to discussions of him stepping down as CEO. This demonstrates how corporate governance can act as a mechanism to safeguard the integrity and reputation of the company, even if it means making decisions that go against the individual owner’s preferences.
In conclusion, corporate governance serves as an effective framework for overseeing organizations by involving multiple stakeholders and ensuring decision-making is not solely driven by an individual CEO. The collective input from diverse shareholders helps in assessing risks comprehensively and reducing biased decision-making. The example of Elon Musk highlights how corporate governance can prioritize the interests of the company as a whole over individual owners.