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Corporate world Essay

In today’s corporate world there is a power struggle occurring. This is because of the corporate scandals that have rocked the very existence of corporate governance structure. In business, in the United States, there have been several shifts in the balance of power between corporate stakeholders. The major shifts in this balance have historically occurred when there has been some type of behavior that has been either unethical or illegal on the part of corporations.

Good corporate governance-and successful businesses in the long run-comes from checks and balances, ethical and legal behavior by executives and board members, and accounting for all corporate stakeholders. For the purposes of this paper I will look at the past and present trends in corporate governance; why corporations fall by the wayside and the current struggle for corporations to self regulate as opposed to being legislated in an effort to prove that further legislation could lead to a power shift that would put too much control in the hands of only one stakeholder.

Corporate History As a point of reference, it is important to understand what has driven the shifts from self regulation to legislation throughout 20th century business in the United States. According to Richard W.

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Oliver, in the Journal of Business Strategy, he states, “Nearly every safeguard, regulation, or enforcement body in place now was developed to remedy some abuse that occurred in the past 100 years.

Corporate scandals often come in cycles and waves, predictably following an age of excess” (6). At the turn of the century, Teddy Roosevelt initiated legislation for trust busting laws in response to the “robber barons” and when the banking industry was caught with a number of bad debts, the Federal Reserve was initiated. At the end of the 1920s, after the stock market crash, there were many illegal activities that were brought to the forefront and the Securities and Exchange Commission was developed.

Due to the recession in the following decade, there was little legislation because of the minimal of amount of room for growth in the business community. Due to this down cycle, there was little opportunity for business to take advantage of its stakeholders. During WWII, most businesses were producing for the war effort which meant there was government oversight leading to few chances for business to take advantage. This cycle of good corporate governance held up through the 1950s for the most part.

However, in the 1960s, several corporations were involved in a conspiracy to secure government contracts and a number of executives went to jail as well as safety issues with automobiles coming to light which led to federal legislation to ensure auto safety standards. During the 70’s, environmental issues were brought to the forefront. Manufacturing businesses were polluting the air and water-the least costly method of production. Business disregarded their moral responsibility to citizens in order to increase profit.

This led to the creation of the Environmental Protection Agency. Moving into the 1980’s, all of us are aware of the Savings and Loan debacle. The bailout of the S&Ls led to tighter controls on the banking industry. In the 90s, due to the losses of pension funds from bad investments in Orange County led to pension fund reform. Also, during this period, U. S. businesses had a staggering growth period that led to yet another opportunity for business to take advantage of its stakeholders. This brings us to the Enron, WorldCom, Tyco, etc.

downfall era which has led to the Sarbanes-Oxley Act of 2002. Today, we are also hearing of large overseas corporations falling by the wayside. This is an important fact because corporate governance structure varies from country to country. In some of the countries, the owners (shareholders) have a much greater amount of power over boards of directors, and in a number of instances actually sit on the boards of those companies. This means that the blame for some of the downfalls of these companies cannot be put totally on the executives as has been the case in the U.

S. The point here is that there are a number checks and balances in place in corporate America that are supposed to keep one group of stakeholders from gaining too much power. Unfortunately, what has occurred in most all of these historical examples has been that the greed of all those in the checks and balance system are to blame for periods of corporate downfall and not just the executives of those corporations. Furthermore, not all of the corporations in the U. S. are involved. Many can remain ethical and not become too greedy even in times of great prosperity.

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