Corporate governance is an essential part of creating an ethical
organizational environment. It establishes control mechanisms in an
organization to ensure the ethical values of the company guide the
decision-making process and that ethical standards are being followed
(Mintz, 2020). This entails developing formal systems of accountability,
oversight, and control. Strong governance reduces the opportunity for
unethical decisions and research suggests that corporate governance
has a positive relationship with social responsibility. There are several
theories on the best way to implement corporate governance but two of
the most common are stakeholder theory and agency theory.
In my current job as a mortgage underwriter one of the most important
aspects of my job is attention to detail. There is a somewhat “hard” rule
that once I see something I can’t unsee it. There are situations where I
am faced with a decision to do what is either right for the borrower, or
right for my company, creating somewhat of a stakeholder theory
example of corporate governance. For example, if I discover in a
borrower’s bank statements a personal loan that was not reporting on
their credit report, I am obligated to add that loan to the borrower’s
liabilities. This can, and has, made a borrower ineligible for a home
loan. In this decision I am faced with the ethical decision of “unseeing”
the loan in the bank statement, potentially costing my company
hundreds of thousands of dollars, or reporting it as is my duty and
costing a family the opportunity to purchase a home. As you can
imagine this is a difficult decision. The corporate governance at my
company holds strong to making correct ethical decisions, but as we
have learned in this course, this is a far more complex topic than many
believe, and there are many views on what is considered right and
wrong. This example may not mold perfectly to stakeholder theory, but
the decision I make has a benefit to some and a cost to others showing
how a decision affects a wide variety of people and organizations.
In my opinion, the primary components of corporate governance should
always be accountability, transparency, and risk management.
Through these three components I believe a company can create a
wide variety of policies and procedures that prove to be effective in
ensuring an ethical and rewarding place to work.
References:
Mintz, S. M. (2020). Ethical obligations and decision making in
accounting: Text and cases. McGraw-Hill Education.
