Improving Corporate Governance in Small- to Medium-Sized Research Proposal

Pages: 10 (3066 words)  ·  Bibliography Sources: 2  ·  Level: Doctoral  ·  Topic: Business

¶ … Improving Corporate Governance in Small- to Medium-Sized Enterprises

When some people hear the term, "corporate governance," they likely associate it with major publicly traded domestic corporations and multinationals. The need for good corporate governance, though, also applies to companies of all types and sizes, including small- to medium-sized enterprises (SMEs) as well. For example, O'Sullivan reports that, "Corporate governance is concerned with the institutions that influence how business corporations allocate resources and returns. Specifically, a system of corporate governance shapes who makes investment decisions in corporations, what types of investments they make, and how returns from investments are distributed" (2001, p. 1). With respect to how it is practiced in individual corporations, corporate governance "is normally directed toward the internal workings of the company and involves the balancing of the advantages of the corporate form -- which includes the separation of ownership and management functions that ensures limited individual liability for corporate losses -- with the need to exert effective oversight over managerial decision-making" (Detomasi, 2002, p. 421).

The need to "exert effective oversight over managerial decision-making" has become abundantly clear. Following a series of Enron-type corporate scandals in recent years, the need for good corporate governance has become increasingly apparent. In reality, though, the push for improved corporate governance began during the 1970s. According to Rose, "Corporate governance inevitably receives attention and calls for its reinvention following upheavals in the financial markets. Although the corporate governance industry received a significant boost because of Enron and WorldCom, the seeds of the modern corporate governance industry were sown in the 1970s, in response to the corporate dimensions of the Watergate scandal" (p. 888). The fallout from these major corporate scandals has been pervasive and severe. Consumer and investor confidence have suffered greatly as a result of these scandals and there is a growing need for corporate oversight that will ensure transparency and legitimacy to governance measures. In this environment, identifying opportunities to improve the corporate governance of small- to medium-sized enterprises represents a timely and valuable enterprise.

The significance of the study relates to the demonstrated importance of good corporate governance on organizational profitability for SMEs and its ability to provide a number of other important outcomes. In this regard, the World Bank emphasizes that, "A commitment to good corporate governance -- well-defined shareholder rights, a solid control environment, high levels of transparency and disclosure, and an empowered board of directors -- make a company both more attractive to investors and lenders, and more profitable. Simply put: it pays to promote good corporate governance" (the irresistible case for corporate governance 2005, p. 3). Taken together, it would appear to be in any organization's best interests to aggressively pursue corporate governance practices that produced these desirable results, but there are a number of issues that must be taken into account in formulating, implementing and administering good corporate governance practices and these issues are discussed further below.

Background and statement of the problem

Although corporate governance has become the focus of an increasing amount of attention in recent years, there remains a glaring lack of uniformity in the application of corporate governance principles to different types of organizations. For example, Rose (2007) emphasizes that, "There is no specific set of corporate governance rules, standards, and principles to which every U.S. corporation must adhere. Rather, corporations are directed by a variety of sources, some public, some private, which develop and enforce governance rule" (p. 887).

In fact, there is not even a universally accepted definition of corporate governance, with some authorities suggesting that this definition should be uniquely applied to each organization according to its specific circumstances and industry. The research shows that there is only one consistent theme emerging from the literature concerning definitions of corporate governance. In this regard, Shu-Acquaye (2007) reports that, "While the exact definition of corporate governance should be specifically tailored to the requirements of each jurisdiction in which it is maintained, one concept is consistent: Corporate governance relates to some form of company 'control'" (p. 583).

According to Ramirez (2007), implementing and sustaining good corporate governance practices is just good business sense because it provides corporations with a competitive advantage compared to corporations where good corporate governance practices are lacking. For instance, Ramirez notes that, good corporate governance "will lead to superior outcomes, because if investors are confident that their reasonable expectations will be secured by law they will invest at a lower cost to entrepreneurs. Thus, investor protection is associated with higher economic growth" (p. 313). Furthermore, this assertion is supported by a number of studies that have shown the direct relationship between good corporate governance practices and organizational profitability (Ramirez, 2007).

Despite the benefits that can accrue to SMEs that apply sound corporate governance practices (Shu-Acquaye, 2007), there remains a dearth of timely research concerning the need for good corporate governance practices by SMEs, a gap in the research that the proposed study intends to fill using the guiding research questions below.

Research questions

The study proposed herein will be guided by the following research questions:

1. What are the fundamental elements of good corporate governance?

2. Who are the primary stakeholders and actors involved in corporate governance?

3. How can improved corporate governance benefit the profitability of SMEs?

4. Can a set of best practices be discerned from corporate governance practices in larger corporations that are also applicable to SMEs, and if so, what considerations must be taken into account in applying these practices to a smaller organization?

Aim and objectives

The overarching aim of the proposed study is to develop a comprehensive assessment of the importance of corporate governance to the success of a corporation, as defined in part by its profitability but its contributions to the community, the manner in which it treats its stakeholders, as well as other measures of corporate success that are identified as the research process progresses. This overarching aim is divided in several objectives as follows:

1. Deliver a critical review of the relevant peer-reviewed and scholarly literature concerning corporate governance practices in general and how they apply to SMEs in particular;

2. Develop a valid and reliable custom survey instrument that can be used to collect primary qualitative and quantitative data from business leaders concerning their views on good corporate governance;

3. Administer the custom survey instrument to a study population that is sufficient in size and which possesses the requisite business experience to provide the robust findings needed to answer the above-stated guiding research questions;

4. Conduct a statistical analysis of the primary quantitative data collected from the custom survey using SPSS Version 11.0 for Windows (Student Version); and,

5. Synthesize the results of the secondary and primary qualitative and quantitative data to answer the above-stated research questions.

Study design

The proposed study will use a mixed methods design that employs both qualitative and quantitative methodologies as well as primary and secondary data to answer the above-stated research questions and achieve its overarching aim and supporting objectives. This study design is highly congruent with a number of social researchers who emphasize the need to incorporate both primary and secondary resources in a study whenever possible to improve its credibility and the robustness of the findings that result (Neuman, 2003). For example, Dennis and Harris (2002) note that, "Primary data are information that is being collected for the first time in order to address a specific research problem. Ideally, an effective research project should incorporate both primary and secondary data" (p. 39).

This mixed methodological approach is also congruent with other social researchers who emphasize that although qualitative and quantitative research methods are fundamentally different, they can be used in combination to help inform the results that emerge from each. In this regard, Neuman (2003) reports that, "Both qualitative and quantitative research use several specific research techniques (e.g., survey, interview, and historical analysis), yet there is much overlap between the type of data and the style of research. Most qualitative-style researchers examine qualitative data and vice versa" (p. 16). Therefore, the use of a mixed methodology consisting of primary and secondary qualitative and quantitative data was deemed the best suited study design to achieve the above-stated overarching aim and supporting objectives.

Study population and sampling

The population of interest is business leaders with executive-level experience. The proposed study will use a convenience sample of business leaders who satisfy the inclusion criteria of having at least 10 years' of executive-level business experience who agree to participate in the research project. According to Anastas, a convenience sample is "a form of nonrandom sampling that selects research participants primarily based on their availability (given that inclusion criteria are met)" (1999, p. 555). This means that there will be no attempt made at randomization. The proposed study has goal of recruiting a minimum of 50 respondents to participate in the study in time for their results to be included in the data analysis and interpolated in the study's findings.

Data collection methods and instruments

The secondary data required for… [END OF PREVIEW]

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