GOVERNANCE, BUSINESS ETHICS, RISK MGT.

AND INTERNAL CONTROL

1. Differentiate outside stakeholders from inside stakeholders and provide some examples of
these stakeholders.

In a large environment, businesses exist, and many variables directly and indirectly influence the
company. Regardless of its size, nature, structure and purpose, each organization has its own
stakeholders. Stakeholders can be any individual or entity that influences the activities of the company
and can be influenced by them.

Stakeholders are classified into two categories: Inside or Internal Stakeholders and Outside or
External Stakeholders.

INSIDE STAKEHOLDERS OUTSIDE STAKEHOLDERS

“Internal Stakeholders”
-these refer to individuals or parties, within an
organization. Their interest in a company comes
through a direct relationship, such as
employment, ownership, or investment.
“External Stakeholders”
-these represent outside parties which are those
who do not directly work with a company but are
affected somehow by the actions and outcomes
of the business

-since they have a vested interest in the -external stakeholders are those stakeholders
organization, they can influence and can be who, while not being part of the management,
affected by the success or failure of the entity. are indirectly affected by the company's work.

-the internal stakeholders are committed to
providing the company with services.
-they are highly influenced by the company's
decisions, performance, profitability, and other
operations. The organization will not be able to
survive in the long run in the absence of internal
stakeholders. That is why they have a big impact
on the organization. In addition, they are the ones
who know all the entity's secrets and internal
matters.
-they are the outside parties that are part of the
business setting. As Secondary Stakeholders, they
are also known. To know about its performance,
profitability, and liquidity, they are users of the
company's financial information.
-they do not participate in the day-to-day
activities of the entity, but the actions of the
company influence them. They deal with the
company externally. They have no idea about
the internal matters of the company.

Internal Stakeholders include: External Stakeholders include:

Employees, Owners, Board of Directors, Suppliers, Customers, Creditors, Clients,
Managers, Investors. Intermediaries, Competitors, Society,
Government.
2. Differentiate the parties to governance.

SHAREHOLDERS – also referred to as a stockholder, is any person, company, or institution that owns
at least one share of a company’s stock. Shareholders’ role in governance is to appoint the
directors and the auditors and to satisfy themselves that an appropriate governance structure is in
place. As equity owners, shareholders are subject to capital gains (or losses) and/or dividend
payments as residual claimants on a firm's profits. Shareholders also enjoy certain rights such as
voting at shareholder meetings to approve things like board of directors, members, dividend
distributions, or mergers.
BOARD – Board members steer or manage corporations. For instance, business partners with
technical know-how might recruit a board member with the financial or marketing experience they
lack. Directors in this role serve as business advisers. They do not need to be shareholders, but often
are in for-profit companies. Boards of directors are responsible for the governance of their
companies. The responsibilities of the board include setting the company’s strategic aims, providing
the leadership to put them into effect, supervising the management of the business and reporting
to shareholders on their stewardship.

MANAGEMENT - relates to conducting, controlling, and taking charge of the course of action. The
word "management" comes from the word "manes" which means "to control by hand". It is a middle
level activity. Management involves the achievement of results for which the responsibility pays the
manager. Management also includes involving organization to achieving objectives with maximum
efficiency and responsibility for the result. It is the act or function of putting into practice the policies
and plans decided upon by the administration. Management is inferior to administration and is
focused on motivating and controlling functions as well as technical abilities and human resources
abilities. It deals with employees.

3. Explain your definition of:

BUSINESS – it is a habitual engagement in a commercial activity. It connotes regularity of

transaction involving sale of goods or service for a profit. The business objective is what makes
the business go on and conduct its activities in a long run. It is the reason why the business exists.
A business is defined as an organization or enterprising entity engaged in commercial, industrial,
or professional activities. Businesses can be for-profit entities or non-profit organizations. There
are various forms of a business, such as a limited liability company (LLC), a sole proprietorship, a
corporation, and a partnership. Businesses can range from small operations operating in one
industry to large operations operating in many industries around the world.

MANAGEMENT – is the coordination and administration of tasks to achieve a goal. Such administration
activities include setting the organization’s strategy and coordinating the efforts of staff to accomplish
these objectives through the application of available resources. Management can also refer to the
seniority structure of staff members within an organization.

CORPORATE GOVERNANCE - is the system by which companies are directed and controlled.
Corporate governance is therefore about what the board of a company does and how it sets
the values of the company, and it is to be distinguished from the day-to-day operational
management of the company by full-time executives.