McBride Financial Services Governance Evaluation - Essay Example

McBride Financial Services Governance Evaluation ABSTRACT McBride financial service is a new brokerage firm, privately owned by Mr. Hugh. The management of the firm is in the process of strategic planning. The brokerage firm is faced by many challenges because it is a new and has to comply with many governance regulations from the government. These challenges have to be solved immediately, if the firm is to survive. In line with corporate governance, the firm must comply with all international standards where the most excellent practices and the formal laws are observed. All the problems of the firm are fundamental, since the management of the firm has adopted customs that are not in line with the corporate governance standards. The organization is experiencing many challenges at the initial stage since it is a private and small firm. The chief executive officer, Mr. Hugh, is one of the key impediments to the accomplishment of the firm objective, since he is the proprietor of the firm and, as a result, there is a tendency of putting his own interests first. McBride being the chairman of the board and chief executive officer will have a considerable manipulation on the decision made by the board of directors as well as the management team (Maimako, 2010). This is because being the head of the two organs he can object to a decision that is unfavourable to his own interest. Commercial analysts have criticized the organization for its inability to comply with the rules of investment and borrowing funds from beltway investment. Beltway investment emphasizes that all the firms that seek any assistance from it must comply with all the requirements of investment, failure to which the application of the assistance will be null and void. The management of McBride investment is willing to obey and follow all the requirements of Beltway Investments. The management strategy of beltway investment seems to have some doubtful professional standards though McBride seriously opposes the perception. Beltway investment grants firm the freedom to manage on their own style. It emphasizes on the universal standards of corporate governance, and any equity based compensation plans in line with the achievement of the firm’s objectives. There should be no any form of discrimination. Even though McBride is seeking to fully comply with beltway investment he insists that his decision on the directors and the management method are to be followed. He further insinuates that the firm will manage their finances in their own way to meet the firm’s objectives. McBride financial services will not entertain interference of its affairs. They think that external entities will jeopardize the firm’s operations and thwart the achievement of the set goals, (Tricker, 2009). Challenges of McBride financial services MacBride financial services have many challenges since it is a new firm as well as brokerage firm. In line with corporate governance, the firm has to comply with the international standards where best practices, and the formal laws are to be observed. In a nutshell, the problems of the firm are natural since the management organ of the firm has adopted practices that are not within the global standards of corporate governance. McBride financial services are faced by the problem of personnel recruitment. The organization depends on personnel appointed by McBride. These appointments are of doubtful standards since they are based on personal relationships instead of professional qualifications. The decisions to be made by the management organs are so critical and the people to be employed are supposed to be of immense integrity. This means they should undergo a thorough recruitment process to get the best. The policy of Mr. Hugh on appointment is that he appoints individuals who go by what he says, and does what he expects of them. This might not work well for the firms strategic objectives. In the event that the firm experiences by administrative problem, it will be extremely difficult for them to solve them internally. (Hirschey, & Makhija, 2004). The second problem is the lack of adequate funds for investment and daily management activities. Being a private firm there is limited access to capital since this mainly include personal savings and loans. The firm does not have enough collateral to get the required funding from Beltway investment. For brokerage firms, the capital requirement is exceptionally high at the start up stages; the returns are extremely low thus; the expenditure will require a lot of money. McBride is experiencing extremely stiff competition from other brokerage firms. The directors and the management team are at a dilemma of coping up with the dynamic strategies of their competitors due to their diminutive familiarity in the industry. McBride should look for able directors and managers who will manage to come up with counter strategies each and every time the competitors come up with new strategies. The decisions the directors make should always put their competitors on the move, and they should never wait for counter strategy if they anticipate any. (Morden, 2004). Investment has also challenge of interference from other firms. Beltway investment is monitoring the activities of the firm since it has some investment interests with the firm. McBride therefore, has to meet the standards of Beltway. This will bring a negative result on the operations of the firm. Belay can also adopt some investment strategy or can even leak the information to competitors. (Sun, Stewart, & Pollard, 2011). Another challenge to the firm’s governance organ is McBride Hugh who is the proprietor of the brokerage firm. Hugh is the principal of the managing team and also the chairman to the board of directors. This will ruin the reputation of Hugh’s firm since it is not in line with corporate governance policies. The policies provide that there should be clear separation of powers between the owners and managers of a firm. Both the directors and the management team are cronies to McBride Hugh and, therefore, the decision made would only favour Mr. Hugh and not the entire organization. He is responsible to acquiescent the decisions given by the management team and also those made by the board of directors. Mr. Hugh will make a decision that will most favour his affairs. This organizational structure is not well organized since all the management team and the directorates are answerable to the owner. (Tricker, 2009) McBride financial services will not accept the ratings by the Americas corporate ratings. This is because it will be rated amongst the least performing firms. This is because the firm is non-compliance with rules. This rating will ruin the reputation of McBride’s firm. Solutions to McBride Financial Services Problems According to Corporate governance principles, they advocate for best practices in an organization and compliance with all the rules that pertain a business. McBride financial services have of many challenges that require proactive measures to secure its survival. The firm has to comply with the standards of international corporate governance in order to be in the same league with other brokerage firms. Most of the solutions are long term. However, some have to be implemented immediately. There is particularly stiff competition among the firms, and if far-reaching measures are not taken into deliberation, the firm is doomed to fail. Some of the followings are solutions that will see the firm thrive. According to the international standards of corporate governance require that there should be a clear separation of management and ownership. McBride and the shareholders who are in the management team should leave their managerial duties. This will prevent the organization from working towards achieving individual goals and focus on the organizational goals. The position of McBride as the chief executive officer and the chairman of the board should be relinquished to ensure free decision making by the two organs. The management positions should be assigned to individuals who are independent and have the interest of the owners, employees and the external parties at heart. When there is a clear separation of the owners and the decision makers there will be no bias on any of the parties. There will be freedom to make professional and accurate decisions for the wellbeing of the whole organization. The firm will also attract more investors since there is a guarantee that their funds will be used properly. (Morden, 2004). The management structure of McBride financial services will play a key part in the realization of firm’s objectives. It should have a well structured organizational structure as required by the corporate governance structure. McBride has vested all the leadership powers in his office since all the directors and management teams are answerable to his office. This means that he is the only symbol of authority and no decision can be made without his consent. It also implies that he can assent to any decision that favours him. This will not motivate the employees since it portrays a dictatorial system management. To ensure success of the financial services firm to excel there should be a clear policy framework for the separation of powers. Every management office should have some powers to make decisions without consulting from Hugh’s office. These decisions will only be valid if there are competent personnel in every office. According to Maimako, in principles of management there should be some degree of authority in every office and no office should have a monopoly of authority (Maimako, 2010). McBride should hire a management team who are able to match their skills with those of their competitors. The management team should have an in-house committee whose function is to observe what the competitors are doing and coming up with counter strategies. The directors of McBride are employed on the basis of their relationship with Mr. Hugh. This means that the firm will not compete well with the competitors, and in a remarkably short period in the business, the firm will have to collapse. The directors and the management team should undergo training so as to be well versed with the prevailing business environment. This training will ensure that the problem of lack of funds is a universal problem to all businesses at start up. The firm should also look for loans from the capital markets and other micro finance institutions it should also enter into an agreement with financial institutions so as to get loans at a lower interest. The firm should seek government aid at the registrations stages and should request for a subsidy in the registration fee since the government is charging massive tax on registration documents. To prevent interference by other firms, and most precisely beltway investment can be avoided by following all the formalities of doing business, as well as having strong relations with Beltway investments. McBride should comply with all the requirements of Beltway investments so as to prevent the regular monitoring of the firm. McBride should also view it as an advantage since beltway can provide extremely valuable information since it has been in that industry for an awful long time. Beltway can be used as a resource of financial advice since it has experience in managing funds. (Sun, Stewart, & Pollard, 2011). McBride has been going against the policies of corporate governance since he has been recruiting individuals into the firm via methods of doubtful professional etiquette. McBride should adopt the use of independent bodies that will enable the firm to recruit the best candidates for the various positions. This should be within the global standards of staffing. The candidates should be interviewed, and only the qualified candidates should be given the positions. For the recruitment of directors, the firm should hire people who have vast experience, and have an extraordinary respectable record in their previous occupation. The directors are mostly recruited by use of head hunters who have wide information about most directors in different firms and are seeking for employment in other firms. (Tricker, 2009) References Bernstein, D. (1984). Company image and reality: a critique of corporate communications. Eastbourne, East Sussex: Holt, Rinehart and Winston. Hirschey, M., John, K., & Makhija, A. K. (2004). Corporate governance. Amsterdam: Elsevier JAI. Maimako, S. S. (2010). Principles of corporate governance. Abuja: Eriba Pub. Co. Morden, T. (2004). Principles of management (2nd ed.). Aldershot, Hants, England: Ashgate. Mullerat, R., & Brennan, D. (2011). Corporate social responsibility: the corporate governance of the 21st century (2nd ed.). Alphen aan den Rijn: Kluwer Law International. Sharan, B. (2007). Corporate management. New Delhi, India: Rajat Publications. Sun, W., Stewart, J., & Pollard, D. (2011). Corporate governance and the global financial crisis: international perspectives. Cambridge: Cambridge University Press. Tricker, R. I. (2009). Corporate governance: principles, policies, and practices. Oxford: Oxford University Press. Read More