On Parallel Planes: The Benefits of Merging Corporate Governance and TQM Thinking: The Parallel Disciplines of Good Corporate Governance and Total Quality Management Should Be Merged to Create a Best Practice Model for Business Excellence That Keeps Customers, Stakeholders and Regulators Satisfied, Argues Dr Siham El-Kafafi

By El-Kafafi, Siham | New Zealand Management, June 2006 | Go to article overview

On Parallel Planes: The Benefits of Merging Corporate Governance and TQM Thinking: The Parallel Disciplines of Good Corporate Governance and Total Quality Management Should Be Merged to Create a Best Practice Model for Business Excellence That Keeps Customers, Stakeholders and Regulators Satisfied, Argues Dr Siham El-Kafafi


El-Kafafi, Siham, New Zealand Management


The collapse of high-profile business giants such as Enron rammed home like never before the importance of strong and ethical corporate governance. But is good corporate governance, as a standalone principle, sufficient to placate stakeholders; those with a vested interest in an organisation, whose backs have been against the wall at the spectre of fraud, mismanagement and unaccountability in the boardroom? For while strong corporate governance is certainly important, it is only fully effective if organisations also strive for business excellence.

Business excellence can be achieved by combining the parallel philosophies of ethical corporate governance and total quality management (TQM) into a best practice model that keeps both customers and stakeholders satisfied--not to mention the regulators.

While businesses have always focused on providing good customer service, this is no longer sufficient. They now need to take an additional step and give customers even more than they expect. Improving customer services has fallen largely within the domain of quality management systems.

Corporate governance and stakeholders' interests, meanwhile, gained global attention in the wake of the collapse of Enron and other major corporations such as WorldCom, Tyco and Parmalat and the subsequent emergence of a slew of new regulatory requirements.

These high-profile bankruptcies sent major shock waves across the world and served as a red alert to countries like New Zealand and other members of the OECD to concentrate more on how companies are run by having a closer focus on regulatory compliance and corporate governance principles and how they are influencing behavioural changes in organisations.

These failures and corruption scandals resulted in reforms to corporate governance principles, highlighting the cyclical nature of corporate governance crises and reform: increased regulation occurs during periods of recession, corporate collapse and re-examination of the viability of regulatory systems.

The Sarbanes-Oxley Act 2002, for example, significantly changed the corporate governance and reporting requirements applicable to all companies, including those outside the United States, which are required to file reports with the Securities and Exchange Committee.

Similarly reforms came in the shape of the New Zealand Securities Commission (NZSC) Corporate Governance Principles and Guidelines introduced in February 2004, the Australian Stock Exchange (ASX) Corporate Governance Council's principles presented in March 2003 and the OECD Principles of Corporate Governance of 2004.

The common theme is best practice through compliance within a flexible framework. Corporations need to be armed with the necessary tools to prevent corporate fraud, crime, greed and corruption by putting regulatory compliance and corporate governance policies in place.

John D Sullivan of the Centre for International Private Enterprise (CIPA) proposed the following simple corporate governance model in his 2000 paper Corporate Governance: Transparency Between Government and Business:

* Shareholders elect directors who represent them;

* Directors vote on key matters and adopt the majority decision;

* Decisions are made in a transparent manner so that shareholders and others can hold directors accountable;

* The company adopts accounting standards to generate the information necessary for directors and other stakeholders to make decisions; and

* The company's policies and practices adhere to applicable national, state and local laws.

The failure of companies such as Enron and WorldCom also resulted in boards of directors being the subject of criticism in recent years, especially since these firms had corporate governance systems in place, but still failed to address major misconduct and corporate failure. This raises the issue of the quality of corporate governance. …

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On Parallel Planes: The Benefits of Merging Corporate Governance and TQM Thinking: The Parallel Disciplines of Good Corporate Governance and Total Quality Management Should Be Merged to Create a Best Practice Model for Business Excellence That Keeps Customers, Stakeholders and Regulators Satisfied, Argues Dr Siham El-Kafafi
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