Academic journal article IUP Journal of Corporate Governance

Corporate Governance: A Cybernetic View

Academic journal article IUP Journal of Corporate Governance

Corporate Governance: A Cybernetic View

Article excerpt

Introduction

The word 'corporate governance' is liberally used by many in the industry and has become a subject of intense debate and discussion all over the world. Different views are expressed and explanations given with regard to corporate governance, which have given rise to certain basic questions like what is corporate governance? What is the need for corporate governance? Who is responsible for corporate governance?

Corporate governance in institutions has existed since time immemorial. Earlier social responsibility rested with the rulers (i.e., the kings), who had the responsibility of governing the kingdom.1 In earlier times, the welfare of the people and society was taken up by the ruling class. In the current day scenario, the welfare of people is the responsibility of the government, elected by the people. In current scenario, the responsibility of governing lies with the government, like it was with the kings/rulers during the earlier times. In the current times, a new player referred to as the private sector has come up. The private sector responsible for corporate governance in the respective corporations. Though it may not be directly responsible for the welfare of the people it has a big role to play in the welfare of the society.

The government needs the support of private sector in fulfilling its governance duties and obligations towards the society and the nation. However, the private sector can support the government and contribute only when it is doing well. The wellbeing of private sector lies in the wellbeing of the public as they are the customers who consume the output generated by the private sector organizations. The private sector is also dependent on the government as it needs to abide by the laws and policies enacted by the government. This government-society-private sector relationship leads the private sector to realize that it has a social responsibility and that it is important. This has resulted in increasing involvement of private sector in activities, which directly and indirectly support the government to discharge its responsibility in governing the state. Apart from supporting the government, private sector also has a responsibility towards the expectations of its stakeholders. Therefore, there is a need to identify all those who are responsible for governance. All these different scenarios give rise to different questions pertaining to 'what is corporate governance in the current scenario', 'who is responsible and accountable for this in the wider business and organizational context'. This paper elucidates some definitions, constructs the corporate scenarios and goes on to define and validate the structure for corporate governance applying the Viable System Model (VSM).

The paper is structured as follows: the introductory section is followed by defining corporate governance, the need for corporate governance, followed by defining the responsibilities of a governance structure, defining the corporation and governance leading to the validation of the structure applying the VSM.

Literature Review

Any governance is carried out by a set of participants or a group of individuals. Hence, Corporate Governance (CG) can also be stated as a relationship amongst different participants for determining the direction and performance of a corporation. Here direction does not mean the organization strategy but the progress of organization towards its defined objectives and goals.

Governance can also be termed as the function of managing a corporation with a view to realize the corporation objectives, which are beneficial to the investor, employees and other stakeholders.

From the ethical viewpoint, CG in simple terms can also be termed as the governance of a corporation by a group of individuals based on a set of values.

CG has been defined by many researchers in academics and industry. The definitions provided by these individuals is influenced by the area of their research/operation and the elements primary to their subject. …

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