Corporate governance Essay
The ABC Company is a flower manufacturing company in the UK. The products are used domestically and others sold across the Asian countries and the U. S started only recently i. e. 1992, ABC Company’s performance in the sector has made it one of the top ranking flower manufacturing companies in the world. Their success is owed to a number of factors, as discussed below:
HIGH QUALITY PRODUCTION
The flower manufacturing industry is one that requires high quality production for any company to thrive in it. ABC p/c has laid emphasis on quality production that has eased marketability and demand of its flowers world wide.
Even at high prices, the firm still maintains a steady sales turnover rate. This has impacted favourably on its profits as profit is a factor of sales volume and selling prices. In the year ended 31st December 2005, the company sold 300,000 tonnes of flowers. For the period ended ended 31st December 2006, sales rose to 450,000 tonnes. This alone was a 50% increase (i. e. 450,000 – 300,000/300,000X 100%) from the previous year. FINANCIAL OPERATIONS The sustainability of ABC p/c is owed to a financial restructuring on its operational and financial operations.
First, the management has embarked on
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This has reduced its financial risk associated with the usage of fixed capital rather than equity. The triple bottom line effect of this positioning is that the profits (economics) have increased due to a reduction in financial costs (interest). It has also increased the confidence of the investors (people) who channel their investments on lowly geared companies. In the year ended 31st December 2005, the leverage (gearing) ratio was 14% but it improved to 11% in the period ended 31st December 2006.
ABC plc has started analyzing the impact of their actions on society, showing concern and responding appropriately. They have based the argument for social responsibility on the premise (assumption) that organizations have an obligation to care for society. The concern for social responsibility has impacted positively on the environment. This is because the managerial principle on the environment has been the control of pollution as a result of its activities. The flower production industry usually depletes water reservoirs but to them, technologies have been devised such as water recycles.
This has resulted in the saving of this limited resource. Apart from having a positive impact on the environment, the society has also benefited as this is the water they use for their activities like irrigation. Most of the flower farm’s work is purely manual and does not require a lot of expertise. Instead of employing its workforce from far ABC p/c employs the local people to work on its farms. As a result, the financial capabilities/ strengths of the community have been boosted. To further assist society, ABC p/c has embarked on the construction of schools and hospitals and roads.
Finally, the management of the company has embraced corporate governance as a tool for sustainable development. Corporate governance is the process through which corporations/ organizations are well government to achieve the desired purpose, goals and objectives. ABC p/c has applied this management tool through the practice of transparency and accountability in its operations. It has also established a positive and more accommodative corporate culture. This has had positive effects on the employees who in turn have felt motivated and improved their efforts/ capacity.
In summary therefore, because of these positive steps of high quality production, social responsibility and corporate governance the ABC p/c has adapted, it has been able to cut a niche and gain a competitive edge.
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