Apple - Corporate Governance and Sustainability

1. INTRODUCTION

As the world becomes more increasingly globalised organizations are subjected to increased scrutiny from both the media and the public. As such the way organizations govern themselves is becoming increasingly more important and is being used to differentiate with competitors. The aim of this paper is to establish what corporate governance in the banking sector is and link those concepts to how banking organizations perform and how their corporate governance strategies are evolving to increase accountability.

Corporate governance (subsequently referred to as ‘CG') is defined differently depending on the context it is used and particularly in finance there appears to be no consensus (Ekanavake, Perera and Perera, 2009: 21). Chochrek however defines CG as procedures within an organization that are implemented to ensure the organization is accountable to its shareholders (Chochrek, 2005: 15). Turlea et al agrees with this and goes further by saying "corporate governance establishes clear structures regarding accountability, responsibility and transparency at the head of the company, and defines the role of boards and management" (Turlea, Mihaela and Radu, 2010: 383). Ekanavake et al expands these definitions to include the entire network of formal and informal relations that involve the organizations sector and its impact on the world in general (Ekanavake, Perera and Perera, 2009).

CG can therefore be viewed with a narrow and broad mindset depending on how one looks at it. The narrow mindset is concerned with how an organization defines its basic structural orientation and direction. The broad mindset focuses on importance of the market economy (national and global) and the society in which it operates (Olayiwola, 2010: 178). In terms of theory one can consider the narrow mindset: Agency Theory and the broad mindset Stakeholder Theory. There is a clear sense of purpose for CG as it applies to both how the organization relates to its shareholders as well as how it is perceived by the community at large (Olayiwola, 2010: 178).

As described above CG involves the relationships of various parties. Agency theory provides a framework to describe potential conflicts among different agents, in particular about the principal-agent conflict between shareholders and directors/managers (Mülbert, 2009). The fundamentals of the agency theory explain how to resolve conflicts that occur between agents due to the separation of ownership and executive control of company resources (Al-Hussain and Johnson, 2009: 111). Traditionally it is thought that that the manager's self-interest could lead to the misuse of resources from the organization. In the banking industry recently for example there are many examples where risky investments in complex financial instruments have cost stakeholders money for personal gain in the form of lucrative bonuses (Al-Hussain