Essay on "Corporate Governance and Accountability"

Essay 14 pages (4499 words) Sources: 14

[EXCERPT] . . . .

Corporate Finance

Corporate Governance and Accountability

As with almost every culture, the Vietnamese have experienced some of the less wanted effects of economic liberalization: dishonesty, a proliferation of dangerous products dumped on an innocent public, an increase in the amount of swindlers and scam-merchants, local and imported, malicious degradation of the natural and constructed atmosphere, and so on. Being a Socialist state, many are motivated to accomplish that the behavior of greedy, avaricious, disgraceful people is to be anticipated in a market economy. Several think this to be the essential price paid for financial development. Many rival the worst forms of commercial conduct; as if doing so were a precondition for achievement (Longstaff, 1995).

Two matters that have come to light lately in the country of Vietnam are that of bad corporate governance and bad ethical decisions being made by different companies. An example of bad corporate governance can be realized in the case of the Vietnam shipbuilder Vinashin. The shipbuilder came to the edge of bankruptcy after amassing $4.4 billion in debt, harming the government's struggles to build-up large state-run corporations. Vinashin's distresses highlight the lack of transparency, weak responsibility and deprived corporate governance in Vietnam, which is still in the initial phases of transitioning from a centrally strategic to a market-based economy. Vinashin became stuck in debt as it made uncertain investments in a number of businesses, including motorbikes and power plants that were external of the company's central shipbuilding expertise (Murray, 2010).

Amid Vinashin's debts is a $600 million syndicated loan agreed to by Credit Suisse in 2007. Vinashin's management has requested a deferral from the lenders if the company is unable to make the first $60 million principal repayment. People acquainted with the circumstances recently said dozens of lenders subsidized to the syndicated loan. Safeguarding the contract of all lenders might be hard, but avoiding the payment lacking lender approval could put the company at risk of default. Vinashin Chairman Nguyen Ngoc Su has been quoted by Vietnamese media saying the company hasn't yet established an official reply from creditors on whether they would agree to halt the $60 million loan repayment or not (Murray, 2010).

State owned enterprises (SOEs), such as Vinashin, operating under the Law on State owned enterprises are a unit in which the State owns one hundred percent of the charter capital. SOEs are structured under the form of self-governing state's enterprises and Corporation. The Government unitedly serves as the owner representative of the SOEs. Agencies, organizations or Provincial People's Committees have been dispersed and sanctioned to implement tasks as the owner agents. The State invests openly into the SOEs. SOEs are permitted to utilize the state's capital, loans and other legal principal sources to invest in additional enterprises which are functioning under the Law on the Enterprises. The SOEs are in control of preserving the state's investment capital and safeguarding to get the target on monetary issues such as the relation of profits/state's capital. Good corporate governance is the capacity for the SOEs to advance their targets (OECD / World Bank Asia Roundtable on Corporate Governance, 2004).

Vinashin has been a focus of the government's plan of constructing its business organization by way of state- owned companies, as the Southeast Asian country targets advanced position. The present form of supervision for state- owned enterprises in Vietnam hasn't been working successfully. Stakeholders have recently uttered apprehension around corporate governance at Vietnamese businesses. The latest developments at Vinashin only aid to emphasize the quandary. It has been found that the Vinashin administrators have purposely dishonored state guidelines on economic administration that have caused grave penalties. These findings are based on inquiry results into the monetary problems at the Hanoi-based business, which got the $750 million profits of the government's initial foreign currency bond sale in 2005 (Vietnam Arrests Four More Former Vinashin Officials, 2010).

An example of bad ethical decisions made in Vietnam by a large company can be seen in the case of Nike. One of the most determined and stimulating corporate responsibility matters for many global companies is how to produce products in contract factories in less developed nations while compensating reasonable wages and upholding suitable operational circumstances for employees. It was just brought to light about the worldwide giant Nike, whose three central product lines, footwear, apparel and equipment, are made in about six hundred contract factories that employ more than eight hundred thousand employees in forth six nations worldwide (Conner, 2010).

The organizer and chief executive of Nike, who possesses Nike stock valued at $4.5 billion, has validated the efficiency of his simple and unforgiving calculation for creating billions fast. This is done by creating a faddish request for a good by expending tens of millions of dollars for authorizations by widespread U.S. athletes and keeps the business in poor third world nations where employees are remunerated very little and are not sheltered by labor laws (Sampley, 1997).

Most of the Nike employees in Vietnam are women and children who are paid twenty cents an hour and work seventy hours a week making shoes in harmful situations that smell of glue. They have no insurance or retirement safety and some are required to produce a quota of eleven pairs of shoes every day prior to being allowed to go home and are not completely paid for the additional hours. The extended, demanding hours is frequently accompanied with thrashings and disgrace for under manufacturing or meager workmanship. Managers often punish for such trivial violations as talking throughout working hours. In one recently reported occurrence, forty-five employees were made to kneel for twenty- five minutes with their arms in the air. In another occurrence, a manager used a Nike shoe to beat numerous women in retribution for some meager sewing (Sampley, 1997).

The world's largest electronic components manufacturer, Intel, has recently promised to construct its $1 billion factory in graft-ridden Vietnam without fraud. The corporation has even signed an anti-corruption contract with state-owned Saigon Hi-Tech Park (SHTP), where its largest chip plant will be positioned. Transparency International believes Vietnam, the second fastest growing economy in Asia after China, one of the world's most dishonest nations. Last year, the watchdog's corruption observations index ranked Vietnam 123rd out of 179 nations. Property, construction and government agreements are allegedly riddled with corruption. And aid agencies have often protested about cash disappearing. In one swindle, transport ministry officials handling World Bank projects were caught betting millions of dollars from project funds on European football competitions (Chhabara, 2008).

Corporate Governance and Accountability

The dialogues surrounding social responsibilities of corporations are distinguished for their often investigative carelessness and absence of thoroughness. A corporation is a non-natural being and in this logic may have non-natural accountabilities, but business as a whole cannot be said to have accountabilities, even in this indefinite logic. The first stage to clearness in looking at social responsibility of business is to question exactly what it indicates and for whom. Seemingly, the people who are to be accountable are business people, which consist of distinct owners or corporate managers (Friedman, 1970).

In an unrestricted initiative, private property organization, a corporate administrator is an operative of the owners of the business. They have direct accountability to their workers. That accountability is to carry out the business in agreement with their requirements, which usually will be to make as much cash as conceivable while complying with the rudimentary guidelines of the civilization, both those exemplified in law and those found in ethical tradition. In certain circumstances their workers often have a diverse goal. A collection of people might find corporations for an eleemosynary determination like a hospital or a school. The administrator of such a business will not have cash profit as his goal but the execution of certain facilities. In whichever circumstance, the key idea is that, in their bulk as a corporate manager they are a representative of the individuals who possess the corporation or founded the eleemosynary organization, and their main accountability is to them (Friedman, 1970).

This does not mean that it is simple to evaluate how sound they are performing this mission. But at least the standard of presentation is upfront, and the people amid whom a voluntary predetermined organization exists are clearly distinct. The corporate administrative is also an individual in his own right. As an individual, he may have numerous other tasks that he sees or shoulders willingly his family, his integrity, his feelings of assistance, his church, his clubs, his city and his nation. These are often denoted to as social responsibilities (Friedman, 1970).

It is often wondered what is meant by a corporate executive having social responsibility in his role as a business person. It often means that he is to behave in some way that is not in the concern of his bosses. For instance, that he is to abstain from growing the price of the merchandise in order to add to the social objective of averting price increases, even though a price upsurge would be… READ MORE

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