external control in organization (corporate governance)

C O R P O R A T E G O V E R N A N C E I N A S I A ( G M G G 5 3 1 4 ) :

EXTERNAL CONTROL IN ORGANIZATION

Present by :

Raja Abumanshur Matridi (810083)

Corporate governance refers to the system through which the behaviour of a company is monitored and controlled. (Stephen Y.L. Cheung and Bob Y. Chan, 2004) Controlling is the process of measuring performance and taking action to ensure desired results (Schermerhorn, 2011)

Definition

Control consists of verifying whether everything occurs in conformity with the plan adopted, the instructions issued, and principles established. It‘s object is to point out weaknesses and errors in order to rectify them and prevent recurrence (Fayol :1949)

Definition

External control includes any rule or regulation which has an effect on the actions of the company, and can include tax laws enacted by the government which affect the flow of money, a lease which restricts what a company can or can not do with their office space, and laws which prevent discrimination in the company's hiring procedure.

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Role of External Auditor Other organizations had fully outsourced the financial audit to external auditors (Paape, 2007) One measure which could contribute to corporate governance efforts in addressing the agency problem is the external auditor’s involvement (Marianne, 2009)

External Auditor

Jensen (Waymire, 2008) There are three External Control mechanisms : 1.Market for corporate control 2.Legal, political, regulatory system and 3.Product and factor market

External Control

External Influencers (Jeffery K. Mitchell) as follows : Statutes Audits (Financial, Operations) Competition/Market Agreements

•Shareholders Agreement •Financing Agreements •Customer/Strategic Partner Agreements

External Control

schermerthon (2011) External Control include as follows : 1.Bereaucratic or administrative control ( 2.Clan or normative control 3.Market or regulatory control

External Control

1. Bereaucratic or administrative control uses authority, policies, prosedures, job

description, budgets, and day to day supervision to make sure that behavior is consistent with organizational interests

External Control

2. Clan or normative control influences behavior through norms and

expectations set by organizational culture.

sometimes called normative control it harness the power of group cohesiveness and collective identity

External Control

3. Market or regulatory control influence of market competition on the

behavior of organizations and their members. Business firms show the influence of market control in the way that they adjust product, pricing, promotions and other practices in response to customer feddback and what competitors are doing.

External Control

Company control occurs via numerous channels both from within and from outside like the capital and commodity markets . external control via the capital markets became increasingly stronger due to deregulation and the revolution in information technology (Pellervo. 2000)

Capital Market

Figure of External Control

External Control in Organization

(Corporate Governance)

Government :

Regulation or Statutory, Deredulation, bureaucracy

Market for corporate market :

capital markets, market competition, product market,

customer and comodity market.

the role of environmental influences :

the media pressure, the revolution in information technology, and electronic

media

Thank you

C O R P O R A T E G O V E R N A N C E I N A S I A

( G M G G 5 3 1 4 ) :

EXTERNAL CONTROL IN ORGANIZATION