American Journal of Operations Management and Information Systems

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Corporate Governance in Manufacturing and Management with Analysis of Governance Failures at Enron and Volkswagen Corporations

Received: 25 June 2019    Accepted: 27 August 2019    Published: 04 January 2020
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Abstract

Good corporate governance is important in management of all organizations. It gives direction to an organization in matters of accountability, integrity and quality of product and service offerings in the wake of stiff competition and conflicting stakeholder interests. Business challenges and realities create conditions that favor governance failure through unethical conduct hence the need for regulations in addition to self-governance. Business ethics in business and manufacturing helps organizations in making ethically critical decisions. Corruption is a significant indicator of governance failure and involves illegal activities, criminal activities that are both financial and non-financial abuses and benefits. Corporate governance should provide a framework upon which organizations are hence creates order and harmony between various stakeholders. Good corporate governance improves organization’s image as a self-policing institution that is responsible and honest. Whereas self-regulations looks more attractive for free market economies, legislation and control is necessary since not all managers believe and act within good corporate governance. The board of directors should set the strategic objectives and provide leadership for realization and supervise the management and report to shareholders on their leadership. The Enron Corporation and Volkswagen scandals demonstrated that severe consequences result from failed corporate governance in form monetary and non-monetary that affect both perpetrators and the innocent. Where corporate governance fails, major indicators include, manipulation of financial records, corruption, poor quality products and exaggerated quality specifications in manufacturing and engineering, high staff turnover, lack of transparency and accountability, poor stakeholder relationship, poor performance and low economic development leading widespread poverty and social disorder. External enforcement should be considerate to genuine stakeholder interests to avoid legislation that will encourage cheating for survival. Perpetrators of governance failure, should be punished both as individually and as organizations to set an example to others in the form of penalties that are reasonably high to discourage noncompliance.

DOI 10.11648/j.ajomis.20190404.11
Published in American Journal of Operations Management and Information Systems (Volume 4, Issue 4, December 2019)
Page(s) 109-123
Creative Commons

This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.

Copyright

Copyright © The Author(s), 2024. Published by Science Publishing Group

Keywords

Corporate Governance, Code of Ethics, Business Ethics, Corruption, Volkswagen Scandal, Emission Levels Scandal, Corporate Reputation, Corporate Scandal, Enron Scandal, Ethical Failure

References
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Author Information
  • Department of Mechanical and Manufacturing Engineering, University of Nairobi, Nairobi, Kenya

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  • APA Style

    Moses Jeremiah Barasa Kabeyi. (2020). Corporate Governance in Manufacturing and Management with Analysis of Governance Failures at Enron and Volkswagen Corporations. American Journal of Operations Management and Information Systems, 4(4), 109-123. https://doi.org/10.11648/j.ajomis.20190404.11

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    Moses Jeremiah Barasa Kabeyi. Corporate Governance in Manufacturing and Management with Analysis of Governance Failures at Enron and Volkswagen Corporations. Am. J. Oper. Manag. Inf. Syst. 2020, 4(4), 109-123. doi: 10.11648/j.ajomis.20190404.11

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    Moses Jeremiah Barasa Kabeyi. Corporate Governance in Manufacturing and Management with Analysis of Governance Failures at Enron and Volkswagen Corporations. Am J Oper Manag Inf Syst. 2020;4(4):109-123. doi: 10.11648/j.ajomis.20190404.11

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  • @article{10.11648/j.ajomis.20190404.11,
      author = {Moses Jeremiah Barasa Kabeyi},
      title = {Corporate Governance in Manufacturing and Management with Analysis of Governance Failures at Enron and Volkswagen Corporations},
      journal = {American Journal of Operations Management and Information Systems},
      volume = {4},
      number = {4},
      pages = {109-123},
      doi = {10.11648/j.ajomis.20190404.11},
      url = {https://doi.org/10.11648/j.ajomis.20190404.11},
      eprint = {https://download.sciencepg.com/pdf/10.11648.j.ajomis.20190404.11},
      abstract = {Good corporate governance is important in management of all organizations. It gives direction to an organization in matters of accountability, integrity and quality of product and service offerings in the wake of stiff competition and conflicting stakeholder interests. Business challenges and realities create conditions that favor governance failure through unethical conduct hence the need for regulations in addition to self-governance. Business ethics in business and manufacturing helps organizations in making ethically critical decisions. Corruption is a significant indicator of governance failure and involves illegal activities, criminal activities that are both financial and non-financial abuses and benefits. Corporate governance should provide a framework upon which organizations are hence creates order and harmony between various stakeholders. Good corporate governance improves organization’s image as a self-policing institution that is responsible and honest. Whereas self-regulations looks more attractive for free market economies, legislation and control is necessary since not all managers believe and act within good corporate governance. The board of directors should set the strategic objectives and provide leadership for realization and supervise the management and report to shareholders on their leadership. The Enron Corporation and Volkswagen scandals demonstrated that severe consequences result from failed corporate governance in form monetary and non-monetary that affect both perpetrators and the innocent. Where corporate governance fails, major indicators include, manipulation of financial records, corruption, poor quality products and exaggerated quality specifications in manufacturing and engineering, high staff turnover, lack of transparency and accountability, poor stakeholder relationship, poor performance and low economic development leading widespread poverty and social disorder. External enforcement should be considerate to genuine stakeholder interests to avoid legislation that will encourage cheating for survival. Perpetrators of governance failure, should be punished both as individually and as organizations to set an example to others in the form of penalties that are reasonably high to discourage noncompliance.},
     year = {2020}
    }
    

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