Assessment 4 – Corporate Governance

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Assessment 4 – Corporate Governance

Assessment 4 – Corporate Governance Analysis

NIKE

Corporate governance is the concept of governing a company or organisation through a set of principles and processes. These principles and processes act as guidelines for organisation to comply with, in order to achieve goals and objectives effectively. According to , this in turn provides value to the organisation which satisfies stakeholders and this helps the company develop much sooner. Therefore, stakeholder such as the board of directors, management team, employees, customers, shareholders and the government are all impacted by corporate governance. Nike is a multinational corporation and is considered to be one of the most recognisable brands in the world. Being such an enormous organisation, corporate governance is incredibly important for Nike, as any incompliance will influence Nike’s reputation and image immensely. This is evident through the Nike sweatshop scandals where it impacted on Nike’s reputation to a point where customers were reluctant to purchase the Nike products. Nike however was able to overcome issues through actively trying to comply with corporate governance principles and guidelines.

Lay Solid Foundations for management and oversight

This principle states that a company must establish and disclose all roles and responsibilies of the management and board of directors. The way in which their performance is monitors and evaluated is also vital as stakeholders should know the effectiveness the management team. Nike provides substantial information about the management and oversight of the organisation, which is evident in the Nike Annual Reports. The annual report provides in-depth details of the responsibilities of the board and management and outlines their performances over the year.

Structure the board to add value

The board of directors are the most influential people in the company and therefore the board work effectively and efficiently. The board’s size, skills, commitment and composition must be developed to provide value and performance. Nike’s board of directors are strategically picked to increase productivity and efficiency of the organisation. Nike is able to afford a larger board than other companies, in order to ensure that the organisation’s strategies and decisions are implemented to the fullest potential. Nike’s board is restructured regularly in order to adapt to any changes, however the company rewards the board members which are committed and loyal to the organisation’s growth and development.

Act ethically and responsibly

One of Nike’s biggest scandals was the sweatshop scandal which portrayed Nike as a supporter of child labour and cheap labour. This was incredibly bad publicity for the Nike Corporation, as the company was effectively significantly by these claims of unethical practices. Nike has now stopped the usage of sweatshops, as the Nike Factories now have strict audits and investigations to ensure that the employees are given satisfactory wages and work conditions. Since then, Nike’s reputation has improved significantly and the shareholders are satisfied with the corporation’s ethical practices and responsibility, .

Safeguard integrity in corporate reporting

According to the fourth principle of corporate governance, an organisation should establish a formal and detailed set of policies and processes to safeguard the integrity and honesty of corporate reporting. This is to ensure that all corporate reporting is truthful and transparent. Corporations which do not disclose truthful information can be punished severely, as this is an act of deception and fraud which is ethically immoral. Nike has improved their integrity and transparency within the past few years, ensuring that all information disclosed to the stakeholders is honest and accurate, .

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Assessment 4 – Corporate Governance
Last updated: Feb 2024

Page 1

According to the fourth principle of corporate governance, an organisation should establish a formal and detailed set of policies and processes to safeguard the integrity and honesty of corporate reporting. This is to ensure that all corporate reporting is truthful and transparent. Corporations which do not disclose truthful information can be punished severely, as this is an act of deception and fraud which is ethically immoral. Nike has improved their integrity and transparency within the past few years, ensuring that all information disclosed to the stakeholders is honest and accurate, .

Make timely and balanced disclosure

According to the principles of corporate governance, an organisation must disclose information is a timely and balanced manner. This means that any disclosure of information must be done quickly and fairly for the stakeholders. This is because certain information will have a significant impact on the organisation’s share value and shareholders need to know this information as soon as possible. Nike is renown for its disclosure of information, providing its shareholders and other stakeholders with clear and detailed information.

Respect the rights of security holders

Similarly to providing the shareholders with timely and balanced disclosure, the organisations must also respect the rights of the security holders, meaning that the rights that the security holders have, be it timely disclosure of information, honesty, quality of information, etc. must all be respected by the organisation. Nike is an organisation that respects the rights of its stakeholders, ensuring that the shareholders are not misguided or unsatisfied with the disclosure of certain information.

Recognise and manage risk

An organisation must be able to identify, assess, evaluate and control risks effectively. There are countless risks which can impact an organisation’s performance and being able to mitigate and control these risks, provides an immense advantage over competitors. Nike’s risk management framework is incredibly detailed and each risk is identified, reviewed, mitigated and monitored extremely carefully. Nike’s Annual Reports accentuate the risk management system of Nike, highlighting the key risks that were identified and explain the key strategies for managing the risks.

Remunerate fairly and responsibly

This principle states that an organisation must remunerate its directors fairly and responsibly in order to attain, retain and motivate high quality directors and management, . The executive directors will then be encouraged to commit themselves to the development of value and worth for the security holders. Nike Executives are one of the highest earning executives in the world, and Nike is able to afford this through effective remuneration strategies and the company’s immense profit gains. This ensures that Nike’s board of directors are satisfied with their roles and committed to the success of Nike.

In conclusion, corporate governance is incredibly important for organisations to comply with as it has a significant influence on the organisation’s performance and reputation. Nike has been accused of many scandalous activities; however the corporation has been able to overcome these accusations through effective corporate governance and compliance to the key principles.

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Assessment 4 – Corporate Governance
Last updated: Feb 2024

Page 2

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