Effects of Corporate Governance on Human Resources Management of an Organization


 


            Human  resource  management  and  corporate  governances’  and  side  by  side  to  determine  organizational performance.

Corporate  governance  is  the  framework  of rules  and  practices  by  which  a  board  of  directors ensures accountability,  fairness, and transparency in a company's relationship with its all stakeholders such as financiers,  customers,  management,  employees, government,  and  the  community.

Human Resource Management (HRM) is the process of hiring and developing employees so that they become more valuable to the organization. It involves recruiting the right people for the job, conducting job analysis, planning employee’s needs, orienting and training, managing salaries and wages, motivation, providing benefits and incentives, evaluating performance, resolving disputes, and communicating with all employees at all levels. The basic qualities of a HR manager are extensive knowledge of the industry, leadership, and effective negotiation skills.

Why Interconnection need in Corporate Governance and Human Resource Management?

The Concept of corporate governance originated in the Private Sector as a result of corporate failures, weak management boards, over-powerful chief executives, and  weak internal controls. Private sector is characterized by: lack of separation of chairman and  chief,  executive  roles, lack  of  audit  committee/internal audit  functions ,weak  control/override  of  controls.  Now considered a serious of issues in the public sector because of concerns about; excessive confidentiality in decision making; influence of special interests; inefficiency in public expenditure.  The public sector now has a greater demand for; honesty and accountability in government, with greater willingness to challenge decisions. 

The benefits of corporate governance include: the separation of ownership and control, alignment of the interests of the organization, shareholders, board, employees as well as the community in which the organization operates, protection of organizations as they are important to the welfare of individuals- they create jobs, generate income and income tax, they produce a wide variety of goods and services, they provide mechanisms for savings and investments, Creation  of  efficient  organizations, environmentally  and socially responsible corporate organizations,  promotes  competitiveness and  gives confidence  to investors.

How HRM can be involved in the corporate governance ?:

·         Selection of leaders,

·         Designing of benefits  and  incentives,

·         Structuring  of  control  systems  particularly  board  of  directors, 

·         Fixing of dysfunctional corporate structure.

                 (Scholars Journal of Economics, Business and Management - Mercy Florah Oluoch )

Conclusions:

According  to  Armstrong  (2018) organization performance  is  the  prime  responsibility  of  top management who  plan, organize, monitor  and control activities  and  provide  leadership  to  achieve  strategic objectives  and  satisfy  the  needs  and requirements  of multiple  stakeholders.  The aim of managing organizational performance is to increase organizational capability the capacity of an organization to function effectively. It is about the ability of an organization to guarantee high levels of performance achieve its purpose deliver results and, importantly, meet the needs of its stakeholders.  Nadaraja asserts that HR ensures corporate governance mindsets, culture and thinking top down are enshrined in everyone in the organization for the overall success of the organization. Without doubt, HRS role and contribution ought to be important item on the board’s agenda when discussing corporate HR‟s role  and contribution ought to be important items on  the  Board‟s  agenda  when  discussing  corporate governance  -  how  HR  can  motivate  a  workforce  to execute  the  business  strategy  through  sourcing, applying appropriate capabilities and managing related investments.  Amstrong(2018)further  explains  that  a policy provides continuing  guidelines and  generalized guidance  on  how  HR  issues  should  be  dealt  with to ensure  that  an  appropriate  approach  is  adopted throughout the organization.

The relationship between Human Resources management and the corporative governance can be discussed relation to the recent corporate scandals.  The  recent  corporate governance failure has been attributed to  failure of the senior  HR  managers  to  play  a  leadership  role  in governance. The board of directors has the power to appoint all levels of senior management – including the CEO – and remove them if necessary. Members of the board dictate the future of the company and are involved in all major business decisions. The effect of the  governance  structure  is  the  inability  of  the  HR Managers  to  adequately  monitor  and  control  top executives behavior who engage in unethical and even illegal  decision  making  that  line  their  own  pockets. While a board of directors is a more hands off approach to controlling a company, some stakeholders prefer the hands on approach by directly assuming prefer the “hands on” approach by directly assuming Management positions.  Stakeholders  can  take  over certain  departments  such  as  human  resources management to  micromanage  the  business and  ensure Success. This has led to recruitment of wrong people for the job, poor job analysis and lack of benefits and incentives for the employees.

 

 References:

Chartered Governance Institute UK & Ireland:what is corporate Governance. Cgi.org.uk /about-us

What is Human Resources? University of Minnesota, http://open.lib.umn.edu

Scholars Journal of Economics, Business and Management - Mercy Florah Oluoch the Specific Role of Human Resources Management in Corporate Governance and Organizational Performances-

Michael Armstrong – Hand book of Performance Management:2018 – Evidence based guid to performance leadership-London 2010

Comments

  1. Himani MBA 2023April 30, 2023 at 7:04 AM

    Good content dilrukshi. Well done.

    ReplyDelete
  2. Srimali MBA 2023April 30, 2023 at 7:21 AM

    Hi Dilrukshi.Nice article and very important topic.You have explained it very well.Good job

    ReplyDelete
  3. GwayERP softwareJune 2, 2023 at 5:22 AM

    Rarely this type of blogs are found with a great information.
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    ReplyDelete

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