Corporate governance practices have emerged in free-market economies as a set of structural arrangements with a view to aligning the management of companies with the interests of its shareholders. Subsequently, corporate governance concerns extend to the interests of its shareholders and eventually to society at large.
Company directors around the world are now under intense public scrutiny. Increasingly, the actions of companies and their directors are under intense public scrutiny and comment. Shareholders and the public are demanding ever higher standards of ethics and corporate responsibility.
There is considerable debate about what actually constitutes corporate governance. Simply put, corporate governance outlines how individuals charged with the responsibility of running a corporation should conduct their own and their organization's affairs.
Corporate governance refers to the management's recognition of its fiduciary responsibility to all shareholders, in particular minority shareholders. Managements that do things to benefit one class of shareholders over another are not practising good corporate governance.
The key elements of corporate governance, however, concern the enhancement of corporate performance through the supervision and monitoring of management performance and the ensuring accountability of management to all shareholders and stakeholders. Corporate governance is clearly a system through which corporate entities are directed and controlled. It encompasses the entire mechanics of the functioning of a company and attempts to put in place a system of checks and balances between shareholders, directors, auditors and the management.
In our increasingly complex society, and with the tremendous growth in business in both the public sector and the private sector, PR to win the goodwill of various constituents is part of corporate governance. Businesses today have a social perspective, and think in terms of their social obligations and social sanction.
Government is the single most important storehouse of information on a variety of subjects. In certain areas, the government is the only source of information. But getting information out of this vast storehouse is difficult because of the secrecy inherent in the bureaucracy. For good corporate governance, society should have the right to know how matters are being managed by the government. They should be able to understand how they are being ruled. This is possible only by creating a well-informed society. Effective accountability depends on the people having the necessary information. If there is no accountability, the government is not open. What government administrations need to realize is the elementary fact that their work affects several `publics', which each department needs to identify, consult and try to satisfy within the confines of the government's policies and programmes.
Public relations has today become a necessity to every field, be it public or private sector organizations, educational institutions or government departments. Indeed, it is essential for anybody who has ideas, products or a cause to promote. It is the endeavour of any organization to draw the attention of the public towards its ideas and products. With the present growth in business and commerce in India, the need for public relations has assumed new meaning.
These days, in every area of government, industry and commerce, people firmly believe in their right to be told what is going on and why. All segments of society are deemed to be accountable to the rest as far their policies and actions are concerned. The profession of PR applies techniques of communications to spread knowledge and create understanding. In developing countries like India, where the economy is undergoing a metamorphosis and industry is growing, new products and services are being launched and lifestyles and attitudes changing, PR techniques have a vital role to play, especially in the business sector.
Organizations may survive without PR, but with planned PR programmes, they can expect much better results and can enhance their reputation or image. A company that is consistently a good corporate citizen cannot be easily be a target for attacks. If attacked, the charges against will not be easily believed. PR that anticipates rather than only tries to overcome crises should be the objective of any organization. If a company has not been doing PR, or is not ready with a strategy when a crisis strikes, it would be extremely difficult and possibly too late to have a campaign that would have an immediate impact on solving the crisis.
Properly applied, PR can overcome the mightiest of opponents - even when the opponent has a head start. PR is said to have emerged as a dominant force in what is fundamental to success in business - the engineering of perceptions. PR is an investment towards good communications and good relationships. Therefore, PR can play a central role in good corporate governance by focusing, reinforcing and communicating the achievements of specific objectives at all levels in an organisation.
The role of PR in corporate governance is to improve the employer's and clients' image with shareholders and their target groups. It also has to counsel senior management and company directors, become the eyes and ears of the company and ensure effective channels of communication with clearly identified constituents, stockholders and target audiences. PR needs to communicate with all audiences from different cultural backgrounds. It has to provide relevant feedback to the directors, communicate changing community values and external environmental factors, research the needs and expectations of different target audiences, and tailor publications for minority groups or special communities. The annual report is normally the center point of the corporate communications portfolio. Hence it has to ensure that there is high-quality writing and research in annual reports. PR also has to use appropriate research to support PR activities.
The rapidly changing events around the world have led to intense public scrutiny of major corporations. People are demanding a say in the running of major corporations. They want strong leadership, but also demand responsible, ethical corporate outcomes.
Worldwide, there have been significant developments in the area of corporate governance in recent years. It has extended the scope of responsibility of those entrusted with the task of running business with other people's money. India cannot afford to lag behind, given its commitment to move towards a market-driven economy and globalise its trade and services.
Different countries have evolved different ways of finding a balance between autonomy for managers and their accountability to stakeholders. The function of a code of desirable conduct or corporate governance is to enhance the degree of acceptability of the corporate form as a public limited liability company in perpetuity and the board of directors as a body responsible to stakeholders. In corporate governance matters, the primary role of PR is to provide accurate, timely professional counsel to senior management levels to ensure that they employ effective channels of communication to reach all relevant target audiences.