英国航空公司-公司治理与企业道德分析Corporate Governance and Business Ethics in British Airway.docx

Business School of Ulster UniversityMSc Executive LeadershipCorporate Governance & Business EthicsStudent ID: B00610237Student Name: Man LuoTutor: Samantha GriffithsDate: 04/23/2012Executive SummaryThis report highlights various aspects involving corporate governance and corporate social responsibility at British Airways. This report highlights various theories like stakeholder, resource dependency and economy theories. They are two types of governance theories as illustrated within the report and they include stewardship and agency theories. At BA, corporate governance has been given due regard starting from how the company has restructured its leadership as a way of achieving good governance and CSR. BA has embarked on various CSR programs including philanthropic, ethical, legal and economic CSR. This report also provides some recommendations including establishment of a flight management team under the leadership of the director of flight operations which is independent. This will be able to deal with the specific issues that lead to occurrence of errors. The company should also ensure gender balance that helps demonstrate its regard and respect on both genders. Content1.0 Introduction42.0 Theoretical background52.0.1 Stakeholder theory52.0.2 Resource Dependency theories62.0.3 Economy theory72.1 Governance Theories72.1.1 Agency theory72.1.2 Stewardship theory82.2 Ethical leadership theories82.2.1 Transformation leadership92.2.2 Authentic leadership .9 2.2.3 Spiritual leadership .10 3.0Corporate Governance103.1Conformance at BA113.2Performance (KPIs)124.0Review of the organizations CSR position134.1 Philanthropic CSR134.2 Ethical CSR144.3 Legal CSR144.4 Economic CSR155.0Governance arrangement165.1 ethical Leadership165.2 Effectiveness165.3 Accountability165.4 Remuneration of board165.5 Relation with shareholder176.0Conclusion177.0Recommendation18 Reference191.0 IntroductionThe company has been in operation for over nine decades now. The company can be traced as back as the commencement of the aviation industry. Even though the operating environment has been challenging, the company has been equally up to the task. The company is based in the United Kingdom where its headquartered next to the city of London. The company is established in its own town which is self-sufficient in terms of social services and infrastructure. There enough shops and restaurants and concert hall within the town. The company infrastructure is well connected with good communication systems that use post-modern technology. British Airways (BA), over years has continued to enjoy greater presence across the globe and more especially in Europe. BA is a very strong brand and is recognized by air travelers across the world. This has real boosted the company business and consequently better returns on the owners investments (Corporate social responsibility report 2011). The companys policy is to remain committed to attaining high levels of standards of corporate. More importantly, the company board of directors is answerable to the company stakeholders with regard to governance. As part of ensuring that the company is effective in its corporate governance, it has adopted an Act which provides the list of what is expected of each stakeholder and more especially the company board of directors. According to the Act, the company is expected to account on how it utilizes the Combined Code of the Act and at the same time ensure that it is applying the provisions of the Code. In addition, the Board is expected to provide good governance by demonstrating high of competence in entrepreneurial leadership within the provided framework and internal controls (Podsakoff & Bachrach 2000). More important, at BA, stakeholder engaged is highly recognized given the role it plays in realizing the long-term goals of the company. A good example is demonstrated from the companys regular contact with other larger institutions through the investor relationships where the executives of respective companies meet to discuss on important business. These forums also provide room for comparison of different ideas on which good corporate governance and leadership can be realized within an organizational setting (Corporate governance statement 2009). With regard to Ethics and Corporate Social Responsibility (CSR), the company appreciates that this is the most important consideration that must be taken into the business plan. Even though there have been economic challenges for the company, the company is committed to securely some of its resources for utilization in CSR. The important point is that BA has been on the forefront among the airline companies in developing very ambitious plans with regard to CRS and more especially in managing carbon emissions and ensuring effectiveness in its reduction. The company is also geared towards managing and reducing noise pollution and recycling of used gadgets in order to minimize their disposal to the environment. In general, the companys CSR approach is based on environmental management and its aimed at minimizing the impacts of the business to the environment. The key CSR for the company is to make sure that the company is able to attain of level of management in climate change, waste management, air quality and aircraft noise as well as fuel efficiency. In addition, the company CSR is interested in providing humanitarian and financial support to different community initiative programmes both within and outside the country. The other aspects of CSR that the company has continued are in relation to marketplace and workplace management (Corporate governance statement 2009). 2.0 Theoretical background 2.0.1 Stakeholder theory Stakeholder theory as used in corporate governance and leadership has been on existence for over four decades now. This theory was developed by Freeman in 1984 in order to incorporate corporate accountability and more especially on the area of stakeholders. This theory is a combination sociological and organization aspects. The stakeholder is more of broad research practice that makes use of incorporation philosophies, business ethics, political theories, and economics as well as organizational science rather than single formal unified theory. In other words, the theory seeks to explain the tendency and practice of each stakeholder in realizing corporate accountability (Podsakoff & Bachrach 2000). The stakeholder theory can be defined by taking into consideration the role of different groups or individuals in influencing the performance of the organization. In this theory, the managers are expected to work and serve the interests of the company stakeholders. According to the development of this theory, the company managers have a very complex network of relationship to attend to. This network comprises the company suppliers, customers, owners, employees and other business partners. These groups in one way or the other participate in company business in order to realize good results and therefore need to be given attention by the managers. The objective of the company is to create wealth for its stakeholders. According to Freeman, stakeholder participation affects the decision making process at all levels and therefore the company results must be stakeholder based. According to Rubin (2006) the stakeholder theory puts more emphasis on managerial decisions and how they seek to address the stakeholders interests in terms of value and that no single interest should dominate the other. 2.0.2 Resource Dependency theories This theory seeks to explain the role of the Board Directors in mobilizing the necessary resources that are required by the company. While ensuring that the enough resources are secured for the company use, the directors are expected to create the links with the external environment and more especially where the resources exist. Johnson et al (1996), agrees with the resource dependency theorists that the companies are expected to choose their directors based on their capabilities in enabling the company access important resources for its operations. For instance, those directors who work for the legal firms may prove very critical in the company more especially when legal advice is required. They are expected to advise on such matters while on the board meetings. This is very critical in saving those resources may otherwise have been used to secure those services. The developers of this theory argue that provision of enough resources facilitates the proper functioning of the business and thereby enhancing performance and survival in a competitive environment. Apart from sourcing physical resources for the company, the directors are also expected to search for other resources such as information and skills by liaising with other partners such as suppliers, customers, the policy makers and the social groups as well as the legitimacy (Rubin et al 2006). This theory identifies the directors in four main categories namely the insiders, business professionals and the support specialists as well as the community specialists. The insiders comprise the existing and former company executives and they are expected to provide expertise in certain areas such as financial and legal for general company strategy development. The business expertise comprises the current and past company executives. Their role is to advise on general company strategy. They are also expected to assist in decision making and issue solving. On the other hand, the support specialists comprise lawyers, bankers, the representatives of insurance companies and the public relations professionals. The work of this group is to provide support on specialized areas. Finally, the community influential comprises the political class, the clergy members and the leaders of the community organizations. Their work is to advise on social matters (Judge and Gerhardt 2002). 2.0.3 Economy theory The economic theory in corporate governance explains how resources are allocated for different operations of the firm. The theory demands prioritized allocation of resources based on available information. Proper predictions need to be done in order to determine whether a certain venture is what investing. In corporate governance, the managers are expected to make good use of the available resource for the benefit of the stakeholders (Rubin et al 2006). 2.1 Governance Theories 2.1.1 Agency theory Agency theory is built on three basic assumptions namely: bounded rationality, opportunism and information asymmetry. This theory places more focus on the relationship and goal inconsistencies that exist between the company managers and its stockbrokers. The agency relationship comes into existence when the one party to the transaction and in this case the principle gives some authority to the other party-the agent and consequently affecting the principles choices based on the agents decisions (Rubin et al 2006). In general the theory talks about how the delegation of authority from the principle to the agents becomes problematic. This is because: the interests of the agent and the principle do not always coincide; second the principle is not always able to monitor and control the actions of the agent causelessly; third, the principle cannot easily monitor and control the information that is available or accessed by the agent without incurring the cost.2.1.2 Stewardship theoryThe stewardship theory is founded on psychology and sociology aspects. The work of the steward in corporate governance is to protect and maximize the shareholders wealth by ensuring better organizational performance. In this case therefore, the company managers and other executives are expected to work towards protecting and making good profits for the company stakeholders. Unlike the other theories and more especially the agency theory, the stewardship theory does not emphasize on individualism but rather on the work of the top management to work as good stewards of the company resources by making sure that all company goals are well integrated (Resick & Mitchelson 2006). The developers of the steward theory argue that the managers are more satisfied and motivated when the company objectives are achieved. In addition, the stewardship theory proposes on the need to unify the functions of the CEO and the company chairman so as to ensure that agency costs are reduced and significantly allow for greater role in the companys stewardship. 2.2 Ethical leadership theoriesEthical leadership within an organization is aimed at promoting integrity at the workplace. This is to imply that ethical leadership role in organizations is to address those vices such as corruption, nepotism and unfair treatment of the employees. Many of the observers are of the view that personal traits are very critical in ensuring integrity and effectiveness of workplace. Such elements as honesty and trustworthiness are used to describe what ethical leadership entails. In summary, ethical leadership calls for one to do what is expected of him by the company policy and at the same time ensure fair treatment of others (Podsakoff & Bachrach 2000). 2.2.1 Transformation leadershipThe transformational leadership is considered ethical or moral since it demands the leaders in companies to take the lead in inspiring the employees to start thinking beyond self- interests in order to realize the common objective. It is argued that transformational leaders can be either ethical or unethical depending on the motivation behind their leadership. In addition, transformational leadership can either be authentic or pseudo. First, the authentic transformational leaders qualify to be ethical leaders because of the moral values they stand for which include: honesty and fairness. On the other hand, pseudo transformational leadership is defined by those leaders who are out to satisfy self and political interests. Transformational leadership and ethical leadership share a common point since they all focus on personality traits as very critical in providing good leadership. In general, like ethical leaders, transformational leaders demonstrate care for others and they tend to be consistent with the values they stand for (Resick & Mitchelson 2006). 2.2.2 Authentic leadership theory This theory explains that the leaders are expected to be fully of how they think and act and at the same time to be perceived by others as people who are totally aware of their own and about others. The authentic leadership needs to address issues such as values, knowledge and strengths alongside being aware of which context they are operating in. Authentic leadership is also expected to be confident, hopeful and optimistic as well as resilience in their operations. In addition, they are expected to demonstrate a high level of moral character in their leadership. Some scholars argue that authentic leadership provides good foundation for that could easily incorporate all other aspects of leadership such as charisma, transformation and ethical leadership. Such elements as openness, self awareness and transparency as well as consistence are all attributes of authentic leadership as argued by (Rubin et al 2006). 2.2.3 Spiritual leadership Spiritual leadership is composed of values, attitudes and actions that are very critical in influencing the individual motivation and that of others who feel part and parcel of a certain grouping. Spiritual leadership is also inclusive of religious ethics and values that are leadership based. This type of leadership, many leaders draw it from spiritual values such as integrity and honesty as well as humility which are particularly important in creating trust in leadership. This means that the authentic leaders can be relied on. Authentic leadership can also be demonstrated through behaviors either in practice or ethical consideration and treatment of others. The vision explains the companys objective and its identity. Faith or hope is used to reflect on the confidence that individuals have that the stated vision will be realized. Finally, altruism comes into existence based on the care and reservation of the working environment as argued by Judge and Bono (2000) 3.0Corporate GovernanceCorporate governance concept in the recent past has seen a lot of recognition in the world of business. This is particularly because of its role in creating value for the money invested in the business by the owners. Corporate governance is described as the process in which the power of an organization is used in running the affairs of the company. This is more particularly with management of company assets and resources with the primary aim of creating term value for the shareholders interest. Corporate governance is seeking to make sure that the company managers act in the best interest of the organization and its owners. Good corporate governance is very critical in enhancing the companys competitiveness and effectiveness as well as sustainability (Resick & Mitchelson 2006). At the BA corporate governance, has been given due regard starting from how the company has restructured its leadership. The company has persistently embarked on re-inventing on different working ways in the country. The company is working on creating the leaner organization by encouraging a culture of high performance. Creating a leaner organization is expected to make the company the most competitive in the industry. The company is encouraging interaction between different key stakeholders in order to b