Shiza Daud

01-321211-033
Bahria University
Barriers to Ethical Corporate Governance:

These barriers can impede information processing capabilities, leading the board to fail in its monitoring
duties:

INDIVIDUAL FACTORS (related to the individual board members):

Outside job demands: As successful and busy professionals, many board members simply do not have
the time and availability to do their jobs effectively;

Complexity of outside job demands: With outside responsibilities involving complex issues and
situations, the board member is unable to focus on the firm’s priorities;

Dissimilarity of outside job demands: A board member may not have the experience or knowledge
required to make effective decisions for the firm.

GROUP FACTORS (related to the dynamics among the directors on the board):

Board size: Large boards are less effective because of difficulty in coordinating actions, lack of
cohesiveness, etc.;

Meeting frequency: The board meets too infrequently to build trust-based working relationships;

Diversity of the board: While diversity can add new perspectives, different backgrounds and experiences
can hinder communication and assumptions about how to approach tasks;

Norms of deference: Some board members follow social norms that call for undue deference to the
CEO;

CEO power: Powerful CEOs can control the agenda or board meetings — and who sits on the board.

FIRM FACTORS (related to the characteristics of the firm):

Firm size: Firm size will lead to increased complexity;

Firm complexity. Due to multiple products, multiple geographic markets, foreign ownership, etc. Part-
time boards that meet infrequently do not have the time to fully understand the broad range of
information technologies, products and markets of multi-product firms or the variety of cultural and
regulatory environments of multi-geographic firms, leaving then unable to effectively monitor the
activities and decisions of fully informed, full-time executives and managers.

Barriers to governance:
i) Lack of awareness: this is one of the biggest barriers that come in the way of good governance. Due to
inadequate literacy, lack of information from the government side, and the failure of civil society
institutions there is a lack of awareness among people about the process of governance, and
development initiatives. The sense of apathy among people also compounds the problem.

ii) Absence of transparency and accountability: governance gets derailed due to lack of transparency.
Moreover, lack of accountability leads to authoritarianism and creates a huge gap between the
government and the governed.

iii) Corruption and failure to check corruption: corruption is generally identified as private gains from
using public means through unethical practices. This phenomenon takes away development benefits
from people.

iv) Weak civil society: civil society bridges the gap between government and governed, and checks the
growth of unethical practices. But, when there is an absence of civil society institutions, or when they
are weakened, the gap between people and the government gets widened.Good governance is badly
affected by weak civil society institutions.

v) Lack of strong institutions of governance: governance functions with the Governance: An Overview
support of various institutions such as the legislature, executive, and the judiciary, with a clear
separation of power. If these institutions succumb to illegal and unethical pressures, and they fail to
perform their designated functions, then the institutions get weakened. This results in the failure of the
process of governance, and hampers development initiatives.

The process of governance is being strengthened by modern information technology. Video

conferencing, for example, is a way to organize direct discussions between officials and citizens. The
availability of information on internet sites, the conversion of documents into electronic format, the
storage of all data related to citizens, makes the process of transparency and accountability simple. The
devolution of power by giving constitutional status to grassroots organizations has brought an upsurge
of democratic values and participation among citizens. The participation of citizens in the development
process enhances governance, and, ultimately, democratic ideals.