Managers have other responsibilities

Mangers also have other responsibilities under the act. Someone in the organization must make sure that employees understand corporate ethics, policies and then must train employees and management personnel on how to act ethically in organizations.

In India, the Confederation of Indian Industry (CII) took step towards framing a desirable code of corporate governance in 1998. In 1999 the Kumar Mangalam Birla committee was appointed by the Securities and Exchange board of India (SEBI) to raise the standards of corporate governance. The recommendations of the committee were accepted by SEBI in December 1999, and are now incorporated in clause 49 of the listing agreement of every Indian stick exchange. The implementing of the revised Clause 49 based on the report of committee headed by an acclaimed industry leader highlights the urgency for adoption of good governance practices by corporate India.

The revised clause 49 requires stricter standards for disclosure requirements audit committees review of legal compliances, accounting, utilization of public proceeds etc. It requires companies to file a quarterly compliance report with the stock exchange on several details including the composition of board audit committee and its functioning remuneration of directors, management shareholders etc. The stock exchange in turn is required to file an annual compliance report with SEBI for each listed company. Clause 49 was formally instituted by SEBI in 2005.

The bottom line is that corporate greed and unethical behavior must be stopped. Employees and other stakeholders demand it. Regulations signed into law are attempting to legislate proper behavior but legislation alone cannot work. Instead, company officials must take the lead in establishing the moral fabric of the organization and ensure that it becomes part of the standard operating procedures of the enterprise.

Do controls need to be adjusted for cultural differences?

The concepts of control that we’ve discussed are appropriate for organizational units that aren’t geographically distant or culturally distinct. But what about global organizations? Would control systems be different and what should managers know, about adjusting controls for national differences?

Methods of controlling employee behavior and operations can be quite different in different countries. In fact, the differences in organizational control systems of global organizations are primarily in the measurement and corrective action steps of the control process. In a global corporation for instance managers of foreign operations tend not to be closely controlled by the house office if for no other reason that that distance keeps managers from being able to observe work directly. Because distance creates a tendency for formalized controls the home office of a global company often relies on extensive, formal reports for control. The global company may also use the power of information technology to control work activities. For instance IYG Holding Company (a wholly owned subsidiary of Ito-Yokado Co Ltd and Seven Eleven Japan Co Ltd own the 7 Eleven convenience store chain) uses automated cash registers not only to record sales and monitor inventory but also to schedule tasks for store managers and to track their use of the built in analytical graphs and forecasts. If managers don’t use them enough they’re told to increase their activities.

Technology’s impact on control is most evident in comparisons of technologically advanced nation with more primitive countries. Organizations in technologically advanced nations such as the United states, Japan, Canada, Great Britain, Germany and Australia use indirect control devices – particularly computer related reports and analyses – in addition to standardized rules and direct supervision to ensure that activities are going as planned. In less technologically advanced countries, direct supervision and highly centralized decision making are the basic means of control.

Also, constraints on what corrective action managers can take affect mangers in foreign countries because laws in some countries do not allow mangers the option of closing facilities, laying of employees or bringing in a new management team from outside the country. Finally, another challenge for global companies in collecting data is comparability. For instance a company’s manufacturing facility in India might produce the same products as a facility in Scotland. However, the Indian might be much, more labor intensive than its Scottish counterparts (to take advantage of lower labor costs in India). If the top level executives were to control costs by for example calculating labor costs per unit or output per worker, the figures would not be comparable. Managers in global companies must address these types of global control challenges.