Role of Stakeholders in the Corporate Governance Process

Good corporate governance helps to ensure that corporations take into account the interests of a wide range of constituencies, as well as of the communities within which they operate, and that their boards are accountable to the company and the shareholders. This, in turn, helps to assure that corporations operate for the benefit of society as a whole.

Stakeholders typically include investors, managers and employees, customers, suppliers and other business partners, and local communities. Corporate governance is also enhanced by Regulatory and supervisory agencies, civil activists, and the media.

Employees' roles in corporate governance vary. Employees may me consulted on certain management decisions. Board members are expected to consider stakeholder interests while employees have the right to nominate and vote for board members or even have an employee sit on the board. Also, employees are often made shareholders of the organization in order to give them the power to elect the board and give them a sense of ownership in the company.

TRG Marketing, like CareNetWest, has a board that is not generally involved in risk management. Both companies suffered from failed risk management due to a lack of communication and management within the organization. Because of this TRG Marketing executives were able to embezzle and racketeer money without the board or employees of either TRG Marketing, TRG Administration or TRG Health Plan.

One of the opportunities enjoyed by CareNetWest is that their accountant was independent from the company. Once Tyco, International began to recover from the corruption in 2002 they realized the need for their board of directors to be completely independent from the company- with the exception of the chairman, Ed Breen. This allows the members to make decisions keeping all stakeholders in mind. However, unlike Tyco, International's new board, CareNetWest's board has not seated relevant committees to address risk management issues. Until they do so, CareNetWest will struggle with adopting a corporate governance process.