Suppliers and customers

Suppliers as well as customers are external stakeholders with their own set of objectives profit for the supplier and possibly customer satisfaction with the good or service from the customer that within a portfolio of businesses are only partly dependent upon the company in question. Nevertheless it is vital to consider and measure the relationship in term of financial objectives relating to quality lead times volume of business price and a range of other variables in considering any organisational strategy.

(b) Corporate governance is the method by which organisations are directed and controlled. Where the power to direct as well as control an organisation is given then a duty of accountability exists to those who have devolved that power. Part of that duty of responsibility is discharged by disclosure both of performance in the normal financial statements but as well of the governance procedures themselves. The governance codes in the UK have mostly been limited to disclosure requirements. Therefore any requirements have been to disclose governance procedures in relation to best practice rather than comply with best practice.

In deciding on which of the different interests should be promoted the directors have a key role. A lot of the corporate governance regulation in the UK (including Greenbury, Cadbury and Hampel) has thus focused on the control of this group and disclosure of its activities.

This is to help in controlling their ability to promote their own interests and make more visible the incentives to promote the interest of other stakeholder groups.

A exacting characteristic of the UK is that Boards of Directors are unitary example executive and nonexecutive directors sit on a single board. This distinction to Germany for instance where there is more independence between the groups in the form of two tier boards.

Meticulous Corporate Governance proposals in the UK which have resulted in the Combined Code include:

- Independence of the board without covert financial reward

- Adequate quality as well as quantity of non-executive directors to act as a counterbalance to the power of executive directors.

- Remuneration committee controlled by non-executives.

- Appointments committee controlled by non-executives.

- Audit committee controlled by non-executives.

- Separation of the roles of chairman and chief executive to prevent concentration of power.

- Full disclosure of all forms of director remuneration including shares and share options.

- The Hampel report has an importance not just on whether compliance with best practice has been achieved but on how it has been achieved. On the whole the visibility given by corporate governance procedures goes some way toward discharging the directors' duty of accountability to stakeholders and makes more transparent the underlying incentive systems of directors.