Question

Assignment Description in a nutshell

Explain Importance of Corporate Governance from managerial accounting perspective [CG] and the importance of Corporate Social Responsibility practice by the firms from managerial accounting perspective. Select two profitable businesses in Oman which apply Corporate Social Responsibility and explain how important the activities provided by those businesses from managerial accounting perspective.

Instructions

The assignment should be a minimum of 900 words

Answer 1

CORPORATE GOVERNANCE INTRODUCTION

What is corporate governance : Corporate governance has a broad scope. It includes both social and institutional aspects. Corporate governance is the system by which companies are directed and managed. It influences how the objectives of the company are set and achieved, how risk is monitored & assessed, & how performance is optimized.

Corporate governance is the system of principles, policies, procedures, and clearly defined responsibilities and accountabilities used by stakeholders to overcome the conflicts of interest inherent in the corporate form.

Corporate governance is the interaction between various participants (Shareholder, Board of Director and Company Management) in shaping corporation’s performance and the way it is proceeding towards. Corporate governance deals with determining ways to take effective strategic decisions and developed added value to the stakeholder.

Corporate governance ensures transparency which ensures strong and balance economic development. This is also ensures that the interest of all shareholders (Majority as well as minority shareholder) are safeguard.

Corporate governance affects the operational risk and, hence, sustainability of a corporation.

The quality of a corporation’s corporate governance affects the risks and value of the corporation.

Effective, strong corporate governance is essential for the efficient functioning of markets.

The relationship between corporate social responsibility (CSR) and corporate financial performance (CFP) has been subject to extensive empirical enquiry. Yet the body of evidence that has accumulated about the nature of the relationship is equivocal. A commonly identified reason for the diverse and contradictory results is measurement issues pertaining to both concepts of interest. This article aims to review alternative operationalisations and measurement approaches for the CSR and CFP concepts that have been deployed in empirical literature concerned with the CSR–CFP relationship. Several findings emanate from our study. First, CSR operationalisations in empirical literature range from multidimensional to one-dimensional. Second, CSR measurement approaches include reputation indices, content analyses, questionnaire-based surveys and one-dimensional measures, whereas CFP measurement approaches include accounting-based measures, market-based measures and combined measures. Third, no CSR measurement approach is without drawbacks. In addition to approach specific drawbacks, two problems inherent in most approaches are researcher subjectivity and selection bias that may influence the nature of CSR–CFP relationship detected in empirical literature.

Empirical evidence on the CSR–CFP relationship

A vital issue in corporate governance and management is the influence of CSR on companies’ performance, especially financial performance. The conventional view holds that CSR is costly since being socially responsible incurs additional expenses. Examples of socially responsible actions include investments in pollution reduction, employee benefits packages, donations and sponsorships to the community, etc. The conventional view maintains that these expenses will deteriorate profitability and lead to ‘competitive disadvantage’ (Alexander & Buchholz, 1978).

An opposite view is promoted by stakeholder theory, first introduced by Freeman in 1984. The dissatisfaction of any stakeholder group can potentially affect economic rents and even compromise a company’s future (Clarkson, 1995). CSR is therefore a prerequisite for protecting the bottom line (Epstein & Rejc-Buhovac, 2014). In line with this theory, managers should take account of all individuals and groups with a ‘stake’ in or claim on the company (Melé, 2008), not just the shareholders (Ruf, Muralidhar, Brown, Janney, & Paul, 2001). If managed properly, CSR will not only improve the satisfaction of these stakeholders but also lead to improved financial performance (Aver & Cadez, 2009). For example, satisfied employees will be more motivated to perform effectively, satisfied customers will be more willing to make repeat purchases and recommend the products to others, satisfied suppliers will provide discounts, etc.

As is evident, theoretical rationale suggests both a potentially negative or positive relationship between CSR and CFP. The question therefore arises as to which effect prevails