Corporate Governance and Business Ethics “Nokia” a Corporate Governance and Business Ethics “Nokia” assignment

CORPORATE GOVERNANCE AND BUSINESS ETHICS “NOKIA” ASSIGNMENT
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(July 7, 2011)
Corporate Governance and Business Ethics “Nokia” a Corporate Governance and Business Ethics “Nokia” assignment ssignment
Theoretical Background
The case company that this easy critically analyse is the Nokia Company. Going with the definition of corporate governance, it has been defined by Thomas as the control and direction of companies by ownership, boards, incentives, company law, and other mechanisms” (Thomsen, 2008). As an effect, it can be seen as an appropriate control as well as a proper direction that if not applied in firms, the agency problem might occur. Though its, enhancement might not affect economic prospects, but it has a very significant role to play in shaping large companies.
Corporate governance in most companies has been a major concern because it is part and parcel of business infrastructure that underlay sound economic performance. Corporate governance in one way or the other correlates very well with better performance operation along with market valuation of companies. According to Capron & Swaminathan (1999), by protecting property rights, the company encourages innovation on top of long run investments in any form of physical capital, direct foreign ventures, not forgetting the intellectual property creation. Performance stimulation, high returns generations, on top of company profitability, all encourages productivity growth factor. Power abuse limitation by corporate performance, creates efficient mechanism for wealth transfer from one generation to the other.
Through accountability encouragement, leads to the protection of investors’ interest, which in the long-run enhances both foreign as well as domestic direct and portfolio investment. In large firms like Nokia, governance is much straight forward as there is a dominant consensual vision of what corporate governance ought to look like. Nokia Corporation is among the largest mobile phone manufacture in the world. It has four distinct business groups, namely “Mobile Phones, Multimedia, Enterprise Solutions, and Networks” (Baker, Roger, & Neil, 1998). As a result, the biggest corporate governance problem that Nokia faces involves persuasion of managers to start behaving fairly on investors, and even avoid discretional behaviours on manager’s side. In the process of dealing with such a problem has been granting managers a contingent, long term contracts to ensure that they have aligned their interests with the principals as stated by (Schleifer and Vishny, 1997). In addition, managerial corrections have taken different forms like corporate financial structures and board of directors, and have all been oriented towards monitoring and disciplining management in the shareholders and investors interest.
Business ethics is very much vital, as without it, individuals might go unethical. Both firms and corporations in most cases operate in an environment that is social and natural (Porta, 1985). Due to this fact for existence, business is a duty that bound to accounts for social and natural environment, under which its survival lies (Clark, 1998). This has been far much fundamental to larger companies’ business brands along with culture. Nokia Company has been aiming at setting standards for the industry through initiatives that not only affect the company in a positive way, but also good business senses. Nokia’s company code of conduct commits it to uphold principles of universal declaration of all human rights, global compact as well as international labour organizations. Due to the fact that the company’s communication industry does not consume lots of energy, the company does not substantially pollute the environment. Hence, it does not endanger anybody or any community. However, as a responsible business, the company has addressed its impacts and has been aiming at making a positive contribution whenever possible. In 2007, the company’s priority was the environment. This was because, climate change has been a very serous threat which needs everybody’s contribution in coming up with low carbon economy.
Company Background
The company’s shares were first listed on the stock market in the year 1915. Regardless of its Soviet Union proximity, after World War II, Finland remained linked to both Scandinavian and other countries in the West economically. So during Finish trade expansion, Nokia ended up becoming the leading exporter.
During 1960s it started business diversification in an attempt of the company transformation into a regional conglomerate, having interest beyond Finland. It turned attention into acquisition after becoming unable to create strong internal growth. However, during government rationalization to two underperforming companies, the government ended up favouring Nokia, under which it was forced to merge, (Samuelson, 1970), and (Kucera, 2002).
Though the effects of oil crisis in 1970s were not a catastrophic as such, but it forced it to reassess its dependence on Soviet trade, along with international growth strategies. As a result, the company expanded to other Scandinavian countries. At this period, instead of selling weak sectors, it promoted of machinery division into robotics and automation systems. Cable division ended up working on fibre optics, while forestry sector moved to high grade tissue.
By 1980s the company become the largest TV manufacture in Scandinavia Salora, which later was combined with Luxor to concentrate on stylish consumer products. It also acquired data system sector in Swedish Erickson group, hence becoming the leading Scandinavian information technology company. Though there was no competition, in Europe market, the company followed the footsteps of Japanese companies by negotiating to becoming original equipment manufacture, to manufacture items for its competitors, itself becoming a subcontractor. The company got itself into cellular business by 1974, when it assisted in the design process the world’s first international cellular system. As a result, it continued making lots of investments in mobile phone manufacture.
By 1991, the company concentrated further on telecommunication business by even ending up selling its power unit, television tire as well as cable units. However, there were some successes in cellular phone segment, which brought innovative and creative product in the market faster with a particular concentration on one ever smaller and easier to use mobile phones. This ended up bring enough success as well as global acknowledgment, (Spender, 1993), (Porter, 1980) and (Donaldson, & Preston, 1995).
However, in 1995, Nokia enjoyed the opportunity of a head of the market; it had beaten its competitors like Motorola. This is especially in northern America. This leading position was brought about by the company’s process of shifting from analogue to digital phones. However, the company faced another problem of having more digital devices that could not sell, but with inadequate analogue devices to sell. However, due to its long term strategic plan, the company went through the saddled moment for a very sort time, and it was again back to the lead.
Another support of such a surge came from the introduction of 6100 digital phone series. This sector proved to be far much popular due to the innovative and attractive features. For instance, such phone was smaller in size, very light as well as very superior battery which had long life. As if not satisfied with mobile phone market, the company engaged itself in the field of mobile internet division in late 1990s. By that time, 9000 Nokia communicator was already in the market. This type of phone was described as a personal all-in –one device of communication, that comprised of the following feature; internet, e-mail, data, along with fax referral services. In the history of phones, Nokia was the first company to come up with cellular phones which had laptop computer connections for the transmission of data via the mobile network. To strengthen its further product development, Nokia ended up acquiring more internet technology companies like Vienna system Corporation.
To the top of wireless world, Nokia ascendant in 1990s, as it could be traced to the firm being in the position consistently year after year. It came out with very high margin products which were superior and still superior as compared to what their competitors were producing. In the 21st century, the company has ended up increasing wireless convergence sand internet technology development, as well as the coming up with the third Generation (3G) wireless technology, which came after Analogue as well as digital generation. Due to very profit margins, the company has the capability of spending massively on research and development. However, the “greatest threat was chipmakers such as Intel would turn mobile phones into commodities just as they had previously done with personal computers” (Williams, 1989).
As per now, Nokia Corporation is the major player in the industry of mobile phones. It has entered into a level at which it producing a variety of mobile devices along with services and software that enables individuals to enjoy “music, navigation, video, television, imaging, games, business mobility and more. Nokia also provides equipment, solutions and services for communications networks through Nokia Siemens Networks”, (Burt, & Greg, 1998).
Nokia’s Corporate Social Responsibility Report Analysis
In its 2007 corporate social responsibility report, the Nokia maintains its vision of coming up with a world where everyone is connected, and mobile phones subscriptions reaching 4 billion by 2009. However, growth and convergence of the internet and mobile technologies are not the only strategy; it also aims at carrying on its business in ways that will benefit all people, communities as well as the environment.
The report outlines that, environmental as being an opportunity other than looking at it as a constrain , as the company believes in helping people in making more sustainable decisions, along with the reduction of the ‘footprint’ of the company’s products as well as operations. The company has placed re emphasize on the environmental impact of the communication industry particularly energy efficiency, (Schneper, & Guillén, 2004). The report outlines that, Nokia Company has been targeting ways through which it can enhance social as well as economic benefits, through which they can boost economic developments as well as improving life quality. In the process of attaining life quality, the company has been quoted by several organizations as being the employer committed in promoting human rights, as it has effectively managed risks, apart from meeting essential global standards. This has been based on its societal participations and workplace safety along with labour practices. The report outlines how its code of conduct is set in a manner that it will be behaving in a manner that it will be following the government directives and legislations in all countries that they will be operating from. This report outlines these and other elements, but for the sake of this paper, I will only concentrate on two elements, namely: government & customers, and labour regulations and employees.
Government and Customer Satisfaction
Government:
The company report states that, its code of conduct clearly explains how the company will be behaving in all of its business activities, including how it will be abiding to government legislations as well as engagements. The main principle that will be governing the company is engaging governmental organizations in issues that the company has credible contribution to make. It outlines that, since it started its operations, the company has been engaging with governments all over the world in a wide range of matters that are relevant to the company’s business. The report highlights that, the company does not in any way participate in funding any political parties as well as any other political groups, but it pays all legal fees that the country’s constitution has laid down like taxes. In addition, in its public policy, the company has engaged itself in environment and accessibility, (La Porta, Lopez-de-Silanes, & Shleifer, 1999).
The report says that, it is the belief of the company to participate in all developmental affairs as well as reasonable regulations that in one way or the other provides a framework for the environmental requirements, as well as creating incentives for environmental improvements that are involuntary. Concerning the 2007 follow-up for the European commission’s integrated products Policy, abbreviated as (IPP), pilot study on how the mobile phone industry can participate in the process of reducing environmental impact of their products throughout their lifecycle. Going with the work that was done by the task force dealing with IPP, Nokia has signed a voluntary agreement along with other major mobile phone manufactures. Apart from this, the company has also participated in the European Union initiatives of developing a sustainable consumption as well as production action plan, which has also involved revising regulations on eco-labelling and energy labelling¸ (McWilliams & Siegel 2001).
Concerning the issue of accessibility, the report states that, the company has been participating in European’s inclusion policy in some countries like Lisbon and accessibility programs. Where Nokia contributed to the ministerial debate, in the discussion dealing with the ways through which digital gaps between developing and developed can be closed. Among the recommendations that the company proposed includes: “Taxation and licensing on mobile communications should be reviewed to increase access by reducing the total cost of ownership.
Globally recognized standards for assistive technology interfaces should be developed to achieve interoperability between mainstream and assistive technologies. Work by the European Information & Communications Technology Industry Association on real-time total conversation should be supported. EU governments should consider ‘design for all’ programs in their education systems. Multi-stakeholder dialogue should be encouraged to effectively tackle the challenges of e-Inclusion” (Corporateregister.Com, 2007). In the summit, both the EU head of states and African presidents agreed unanimously that information and communication technologies are the main participants in the process of alleviating poverty, employment, growth along with socio-economic development.
Customers:
Apart from satisfying government regulations and legislations, the company has been trying to come up with innovative, high quality products as well as services which in one way or the other are helping people to be connected. It is company’s desire to ensure that it is meeting the needs and wants of all users. Product as well as service development has been taking into account social and environmental issues, including battery life and internet technology.
The report stipulates that, the company has been making majority of its products through distributors, network operates, as well as Nokia branded stores. This kid of business forms the company’s main customers, together with small number of independent retailers whom the company sells to them directly. However, some products are sold users directly through online. The company is also, is “creating a chain of Flagship Stores in the world's premier shopping locations which offer Nokia products and services in a fashionable, interactive environment and with highly-trained staff. In 2007, we opened our seventh Flagship Store in Shanghai, China,” (Corporateregister.Com, 2007)
The report supports this effort by stating that, the research carried out among consumers and customers confirms a very high level of satisfaction. According to the survey, distributors were the most satisfied customers, while operator groups happened to be the most demanding. The most satisfied strengths included: diversity of product range, account teams relations, as well as logistics.
Labour Regulations and Employees
Employees:
The report states that, the company’s success depends on talents along with commitments of the company’s employees. It has been the aspiration of the company to retain and attract the best employees. All this is to ensure an inclusive workplace that brings people together from a diversified background, as well as provision of excellent opportunities for the development of employee’s carrier. The company recognizes the issue of offering competitive rewards with the aim of recruiting the most talented people in every market that they operate. It is the desire of the company to ensure that all employees are enthusiastically engaging in business. The management has been encouraging everyone to contribute by defining what Nokia means to them. The company has been consulting employees on all changes that concerns them, and value their views much. The company is also committed to highest achieve the highest standards of both ethical conducts and as well as full compliance with both national and international laws, (Tamer, Gary & John 2007).
Labour Regulations:
At all production levels and sites, the company has met all recognized international and national standards. All sites and levels have been complying with the company’s global employment guidelines, (Schneider, 1987). The senior manage...