After Reviewing the Various Corporate Governance Mechanisms, Which ones Do You Evaluate as Being Ineffective Against Disciplining Mgr's Poor Performance

1. after reviewing the various corporate governance mechanisms, which ones do you evaluate as being ineffective against disciplining mgr's poor performance? Why?

Discipline-based governance

Includes

A)  Executive penalties

Executive compensation alone is ineffective in monitoring and controlling the agent’s actions. Additional executive penalty scheme is required for increasing effectiveness. Also, both financial and non-financial penalties more non-performance can be an alternative or supplement to incentive schemes.

Penalties that include power downsizing, dismissal can be more effective in preventing the agents from gambling with the shareholder’s investments and firm’s assets thus bringing about better alignment of the interest of the shareholders and management

B)  Auditing

Independent auditing can be a prerequisite for discipline-based corporate governance.

Auditors have to monitor the integrity of financial statements and to highlight discrepancies found to reduce attempts at fraud and misconduct. This method is effective in reducing fraud attempts provided that the auditors do not have conflict of interest present. Managers found to be engaging in such activities can be dealt with immediately and penalised accordingly to the severity of their actions.

C)  Code of conduct

Clear provision of practices and behaviour that must be abided at all times.

Punishment of transgression and rewarding of desired behaviours should be done to motivate employees to behave ideally.

This method is effective only if it is reinforced and punishments are server enough to serve as a deterrence. Otherwise, the code is redundant and just for show only.  

D)  Ethics program

Encouragement of compliance to being ethical is all dealings within the organisation. This method is only effective if reporting mechanism for misconduct companied by sufficient protection and policies has to be in place for employees to be able to blow the whistle when wrongdoings are detected.