University of PhoenixApril 06, 2009Benchmarking Article: Does Corporate Governance Matter?Benchmarking is a great way to contrast and compare well know companies. The two companies selected for this benchmark is two Japanese based companies (Toyota and Cannon) and two US companies (General Motors and Xerox). The purpose of the assignment is to determine what role corporate governance plays in the success of each company.
Based on performance, both Toyota and Cannon ranked highest in performance, and has managed to be more profitable that US companies (General Motors and Xerox).
In the reading of the article, key stakeholders, the governing board and the company's strategy were analyzed to determine if the corporate governance is the reason for the success of the Japanese.
Japanese firms contend that their success is derived from the policy of lifetime employment. Neither Toyota nor Cannon has had to lay off employees to cut cost to support the company's financial position.
US firms tend to continually practice reconstructing their firms with lay-offs and job cuts, to help support the company's financial position.
Toyota and Cannon's board structure is better position than those of the US companies. Toyota and Cannon has over 27 board members (doubling that of the US companies) and the boards are divided into two groups of directors. One director focus is on corporate level strategies, and the other director primary concern is on operating decisions. General Motors and Xerox have a hierarchy system that is found in most US companies; CEO, chairman, and directors. This concept has been found ineffective in the areas of internal controls, which has resulted in decades of poor performance, due to a lack of leadership provided by the CEO.
The article suggests that by having more members, and a board divided by purpose, is the main reason that Toyota and...