LMOR  Assignment Sample

Professional Email

Sender Address

……………….

Date: 11.2.2022

To

The operational manager

Unilever, UK

Subject: Explaining the importance of corporate governance practices in the financial performance of the organization

Dear Mr/Mrs

Introduction

During the email concept of corporate governance practices will be discussed followed by explaining their implications within the organization. The email will also briefly explain the benefits and limitations that are associated with corporate governance practices that will be helping the operations manager in improving their business activities at the same time achieve positive results. A brief explanation of agency theory related to corporate governance practices will also be discussed within the email that will help in knowing about its functions. The implication of corporate governance practices within the Unilever organization will also be discussed that will be helping in knowing what best practices are being considered by the organization while performing out their regular business activities.

Significance of corporate governance practices

The term corporate governance is associated with controlling and directing the actions within the business that increases the chances of earning high growth and reputation. Corporate governance practices are also being considered by the firm to undertake better decisions that being including of setting out the strategic aim of the organization and directing the actions of the management and the employees towards the same to achieve them within the limited period (Solomon, 2020). Corporate governance practices also turn out to be vital for the firm as it focuses on developing policies and processes that significantly contribute towards the overall progress of the firm. The pieces of evidence gathered in regards to corporate governance practices explains the principles of corporate governance practices that being including of maintaining transparency within their business operations  (Zeb, et al., 2021). Being accountable towards their job roles and responsibilities along with being socially responsible increases the brand reputation of the organization and enable them in being competitive in the challenging business environment.

Explain the advantages and limitations of corporate governance practices within the organization

The benefit of corporate governance practices within the organization is that it ensures market performance and economic development that adds to the credibility of the organization. Contributing towards the economic development through good corporate governance practices enables the organization in keeping its status high and attract a large number of shareholders and stakeholders that ultimately add to the growth of the venture  (Aguilera, et al., 2019). Good corporate governance practices benefit the establishment in maintaining the trust and loyalty of the investors and customers that raises capital gain for the organization from different sources adding towards their strength. Limitations that are associated with corporate governance practices include misleading reports and growing complexities from federal and state laws that increase the burden for the organization in being legally accountable to their activities  (Ting, et al., 2020). Separation of ownership and management is also recognized as one of the main challenges that are being faced by the organization due to poor corporate governance practices. The ownership management distinction might increase the issue of conflict of interest that grows the differences between shareholders and the management  (Bhagat & Bolton, 2019). Good corporate governance practices for the firm also benefits them in reducing waste and corruption that add to the productivity of the organization.

Theoretical framework

Agency theories are being used in corporate governance that helps in explaining the relationship between the agents and principals. The best interest of agency theory lies in forming a relationship between the shareholders and executives of the organization. Agency theory in corporate governance practices focuses on building strong communication that benefits the shareholders and the board members of the firm in discussing the issues and resolving them apparently so that a better decision-making process can be implemented within the organization  (Vitolla, et al., 2020). Whereas, on the other hand, poor communication among them might increase the challenging situation of chaos and conflict that in turn might negatively affect the outcome of the organisation. Furthermore, agency theory in corporate governance practices also benefits the organisation in taking control of its actions in terms of reducing the inefficiencies that might cause financial loss for the organisation. Agency theories are also being used to change the rules under which the agent operates along with restoring the principal interest. Agents must have incentives inspiring them to act in harmony with the principal’s attention  (Kyere & Ausloos, 2021). Agency theory in corporate governance practices aims towards addressing the problem of conflict of interest that arises between the principal and the agent.

Corporate governance on the financial performance of Unilever

Unilever organisation is a UK based consumer goods business organisation that has its headquarter situated in London, England. The organisation maintains corporate governance practices in terms of improving the reputation of the firm in the competitive business environment. Corporate governance practices that are being maintained by Unilever organisation includes of code of business principles that represent the standard of conduct that all of the employees working in Unilever is expected to meet in all of their business operations (Unilever, 2021). A Code of conduct related to business principles has been maintained in the internal business operations of the organisation. Good business practices as part of corporate governance practices that are being maintained by the Unilever organisation includes transparency and accountability, the organisation focuses to provide values and principles, that are being reinforced at all levels within the company (Unilever, 2021). Employees’ contribution is being recognised by Unilever that help them in maintaining a positive relationship with them that help the organisation in keeping the trust and loyalty of the organisation towards the organisation.

 Code of corporate governance for Unilever organisation includes presenting fairly its state of affairs, the result of its operations, cash flows and changes in equity. Corporate governance practices that are being maintained by Unilever organisation includes accounting policies that are being applied consistently in respect of preparing financial statements (Unilever, 2021). The role of the auditing committee in the financial performance of Unilever includes reviewing the financial information that the company intends to disclose. The role of the audit committee also includes reviewing and updating the audit committee charter that also benefits Unilever in maintaining corporate governance practices within the organisation. As part of corporate governance practices, the organisation also focuses on protecting the environment and for the same, the organisation has developed an environmental policy. Responsible sourcing policy for Unilever includes procuring the resources from ethical suppliers that offer green resources protecting the environment from carbon emission and greenhouse gases (Unilever, 2021). The corporate governance practices for Unilever organisation also includes developing environmental management system and processes to improve the environmental performance during the manufacturing process of the organisation. Therefore, the above-mentioned corporate governance practices for Unilever grow their business scalability.

Conclusion

During the email brief explanation about the importance of corporate governance practices within the organisation has been discussed that help the firm in growing their operations and earn success. Limitations and benefits associated with corporate governance practices have also been discussed within the email. Agency theory and its implication in the corporate governance practices have been explained, where it focuses on developing relationship among the agents and the principles along with eliminating conflict of interest. Moreover, during the email corporate governance practices undertaken by Unilever organisation has also been discussed such as maintaining transparency and fair business practices.

Thank You

…………..

References

Aguilera, R., Marano, V. & Haxhi, I., 2019. International corporate governance: A review and opportunities for future research. Journal of International Business Studies, 50(4), pp. 457-498.

Bhagat, S. & Bolton, B., 2019. Corporate governance and firm performance: The sequel. Journal of Corporate Finance, 58(1), pp. 142-168.

Kyere, M. & Ausloos, M., 2021. Corporate governance and firms financial performance in the United Kingdom. International Journal of Finance & Economics, 26(2), pp. 1871-1885.

Solomon, J., 2020. Corporate governance and accountability. London: John Wiley & Sons.

Ting, I., Azizan, N., Bhaskaran, R. & Sukumaran, S., 2020. Sustainability. Corporate social performance and firm performance: Comparative study among developed and emerging market firms, 12(1), p. 26.

Unilever,2021.Governance-of-unilever-accessible.[Online]Availableat:https://www.unilever.com/files/a05bff1b-5b19-4c89-bf85-c085706e74f4/governance-of-unilever-accessible.pdf[Accessed 11 February 2022].

Unilever,2021.Other-governance-information/simplification.[Online]

Available at: https://www.unilever.com/investors/corporate-governance/other-governance-information/simplification/[Accessed 11 February 2022].

Unilever,2021.Our-corporate-governance.[Online]Availableat:https://www.unilever.com/investors/corporate-governance/our-corporate-governance/[Accessed 11 February 2022].

Unilever,2021.Responsible-sourcing-policy-interactive-final..[Online]Availableat: https://assets.unilever.com/files/92ui5egz/qa/93055db1df9d3c3f24e88c3f72ee841d90fa7700.pdf/responsible-sourcing-policy-interactive-final.pdf[Accessed 11 February 2022].

Vitolla, F., Raimo, N. & Rubino, M., 2020. Corporate Social Responsibility and Environmental Management. Board characteristics and integrated reporting quality: an agency theory perspective, 27(2), pp. 1152-1163.

Zeb, S., Shah, I., Rashid, A. & Raza, H., 2021. Impact of corporate social responsibility and corporate governance on firm performance. Journal of Business & Economics, 13(1), pp. 18-34.