In the absence of organizational governance, companies collapse due to individualistic views, which may be limited to the CEO who leads the organization and does not care about accountability or transparency (Oloruntoba, 2017).
This paper will discuss applying organizational governance to the research company (Bechtel). What are the steps that can be taken to reduce governance problems?
Status of Volkswagen and Boeing 737 Max:
Both cases showed significant problems in organizational governance, as Volkswagen executives carried out fraud in diesel cars to be suitable for emission tests. Still, the carcars'sults in emissions were 40 times greater, which caused environmental pollution from more than 11 million cars produced, and the company has incurred billions in fines (Al-Ruweidi, 2018). In the case of the Boeing 737 Max, executives rigged quality over profit; this caused the crash of two planes and the death of all passengers on them; accordingly, this model was stopped, and the company incurred heavy fines as well (Adolph, 2019)
Applying the organizational governance to Bechtel:
The previous two examples can be used for (Bechtel Corporation) to do the following:
Establishing a control system for executive management: Both companies lacked a robust monitoring system from the supervisory board or the board of directors. Because of this lack of oversight, CEOs played with the fate of these big companies. Therefore, establishing a solid oversight system and appointing observers who transmit their reports to the board of directors is of the utmost necessity.
Signing full transparency on executives: There must be a specific system for the reports submitted by the CEO that makes the board aware of everything, big or small. This system enables the board of directors to track business progress seriously and intervene before disasters occur. The problem in both companies is that the board members need to be aware of the violations CEOs commit.
Appointment of Board Members Competencies: The CEO was appointed at Volkswagen due to the full support of a dominant shareholder wing, the Porsche family. According to Adolph (2019), Boeing's board of directors was appointed as they were former government officials without experience in aircraft. Therefore, when appointing the board of directors, they must be appointed because of competence and experience, not just favoritism.
Ensuring the compatibility of the board of directors' decisions: In the two previous companies, there was a lack of agreement between the board of directors on executive decisions; at Volkswagen, the decision to tamper with diesel cars was a single decision by the president and CEO (CrĂȘte, 2016). At Boeing, venturing with quality for money was also a single decision; not all of the board knew it.
Exercise accountability and punish violators: According to (Herkert, Borenstein & Miller, 2020), what happened in the Boeing case is that the board of directors allowed the CEO to complete his work after his conviction in the 737 Max plane case even after he decided to leave the company, they gave him a reward of $80 million. Therefore, this system makes any new CEO repeat the same mistakes as his predecessors; as a rule, if a person believes in punishment, he/she continues in error; violated actors must be punished, regardless of their position, if the charges are proven, they must be punished and expelled from the company immediately.
Suggested steps to reduce future governance problems:
According to (Kepler, Larcker, Tayan & Taylor, 2020), Each board of directors needs to know its oversight responsibilities, the CEO needs to know his duties in transparency towards stakeholders, CEOs need to establish professional advice committees to not fall into governance errors, ensuring the clarity of the line of responsibility between the Board of Directors and the CEO and the development of policies related to direct delegations. The role of the board of directors should be more significant and more robust than the CEO in governance and the decide on against him/her if he/she makes a mistake. Working on evaluating the general performance of the Board of Directors and the CEO in front of shareholders through neutral committees and external offices. Weaknesses and strengths must be examined by the board of directors and the CEO through self-evaluation and work to fix the defect.
Conclusion
All companies strive to survive and continue in various ways; some resort to manipulation to obtain a larger market share and achieve more profits, but disasters happen when there is no governance (Adams, 2020). Toyota has gone through a period of excessive growth that made it neglect some aspects of its quality, with the absence of governance standards and their application, problems occurred that cost many lives, this led to hundreds of thousands of cars being recalled and billions of dollars in losses. Governance is a must to preserve the rights of shareholders and all stakeholders internally and externally.
References
Adams, D. (2020). Accountability | and leadership transparency [Video]. YouTube. https://www.youtube.com/watch?v=TeOYR_OBJu4&t=69s (9:10)
Adolph, C. (2019). SPEEA engineer breaks silence on Boeing’s 737 MAX. Chinese American Forum, 35(2), 28–31. Retrieved from EBSCO multi-search database in the Touro Library.
Al-Ruweidi, M. (2018). Case study: The Volkswagen emission scandal. ResearchGate. https://www.researchgate.net/publication/323998958_Case_Study_The_Volkswagen_Emission_Scandal
CrĂȘte, R. (2016). The Volkswagen scandal from the viewpoint of corporate governance. European Journal of Risk Regulation, 7(1), 25-31.
Herkert, J., Borenstein, J., & Miller, K. (2020). The Boeing 737 MAX: Lessons for engineering ethics. Science and engineering ethics, 26(6), 2957-2974.
Kepler, J. D., Larcker, D. F., Tayan, B., & Taylor, D. J. (2020). Governance of Corporate Insider Equity Trades. Rock Center for Corporate Governance at Stanford University Closer Look Series: Topics, Issues and Controversies in Corporate Governance No. CGRP-81 (2020).
Oloruntoba, S. (2017). Transparency and Accountability by. Retrieved from https://www.youtube.com/watch?v=ZXszPnCZwrI (6:57 mins)