Sarbanes-Oxley Act, Synergy, and MNCs in Developing Countries

NB: We do not resell your papers. Upon ordering, we do an original paper exclusively for you.

NB: All your data is kept safe from the public.

Table of Contents

Impact of the Sarbanes-Oxley Act on Corporate Governance
Synergy and Its Six Forms
Criticisms of MNCs Operating in Developing Countries
Works Cited

Impact of the Sarbanes-Oxley Act on Corporate Governance

When Enron, Tyco, and WorldCom fraud took place, the US legislators sought to develop a policy that would not only rekindle corporate investor confidence but also ensure that such frauds would not occur in the future. Consequently, the Sarbanes-Oxley Act was enacted in 2002. Its main purpose is to create guidelines to ensure that organizations comply with the principles of corporate governance. The Act, which is also referred to as SOX, seeks to protect investors from corporate crimes (Jahmani and Dowling 57). It pays emphasis on the revelation of accounting information through legal frameworks in a bid to minimize fraudulent activities within corporations.

Organizational management has a mandate of ensuring that investors’ funds are not exposed to risks as part of the social corporate responsibility. However, before the establishment of the Act, the US experienced three of the largest cases of fraudulent activities that were acerbated by corporate managers. Bodies that were mandated to conduct oversight roles on behalf of investors also experienced challenges due to the lack of policy frameworks to foster their independence while scrutinizing corporate financial accounts (Jahmani and Dowling 58). In some instances, auditing organizations also engaged in other businesses such as consulting organizations that they were required to audit. The Sarbanes-Oxley Act endeavored to seal all loopholes that made it easy for corporate managers to engage in fraud, which is against the principles of corporate governance.

Synergy and Its Six Forms

All corporate managers continuously look for an appropriate synergy. Rao and Rao define synergy as a state when “the whole is greater than the sum of its parts” (277). In an organizational context, it implies that when different organizational elements such as departments interact and cooperate, they are most likely to achieve success relative to when they function independently. In strategic management, corporations combine different synergies with different business entities through strategies for effective coordination to ensure that the entire corporation becomes larger relative to the combination of all independent units.

Synergy can take different forms. For example, according to Goold and Campbell, it takes six forms, namely, “shared know-how, coordinated strategies, shared tangible resources, elements of scale or scope, pooled negotiating power, and new business creation” (Rao and Rao 277). A business establishment occurs following the exchange of information, skills, and knowledge of different business units or through business partnerships such as joint ventures of internal commercial units.

By combining the purchasing functions of different business units, an organization gains the power of negotiation to reduce costs and/or ensure a superior quality of purchases (Wheelen and Hunger 32). Economies of scale arise from the coordination of different units to reduce inventory costs, increase market access, and to ensure optimal utilization of organizational capacity. The combined units guarantee the sharing of resources such as research and design and manufacturing process. With good coordination, different business units can also share knowledge while at the same time coordinating their strategies to increase their collective competitive advantage.

Criticisms of MNCs Operating in Developing Countries

In the 21^st century, globalization has become an almost inevitable reality. The phenomenon has increased the number of organizations that do business in the international arena. Such multinational companies have been advantageous and at the same time counterproductive to different nations. In the developing nations, apart from employing the local people, MNCs have encountered various criticisms. Rodriguez, Siegel, Hillman, and Eden reveal how MNCs take advantage of cheap labor in the developing nations (733). They also fail to take collective responsibility in ensuring environmental sustainability.

MNCs have a large monopolistic power. Such supremacy makes it impossible for local small businesses to thrive. In developing nations, this power is sufficient to compel small businesses to move out of the production systems. They are also profit-oriented in some situations. Hence, they make excessive amounts of proceeds. For example, in 2007, in its global operations, the Shell Company made 14billion US dollars. To mitigate these criticisms, MNCs need to adopt corporate responsibility and corporate governance policies. They should apply their wages, salaries, and environmental sustainability standards in developing nations as it is witnessed in the western countries.

Works Cited

Jahmani, Young, and Whitener Dowling. “The impact of Sarbanes-Oxley Act.” Clute institute-Online journal 6.10(2008): 57-66. Print.

Rao, Appa, and Parvathiswara Rao. Business Strategic Management and Business Policy. New Delhi: Excel Books India, 2009. Print.

Rodriguez, Peter, Donald Siegel, Amy Hillman, and Lorraine Eden. “Three Lenses on the Multinational Enterprise: Politics, Corruption, and Corporate Social Responsibility.” Journal of International Business Studies 37.6(2006): 733-746. Print.

Wheelen, Thomas, and David Hunger. Strategic Management and Business Policy. Upper Saddle River, NJ: Pearson Prentice Hall, 2012. Print.

Click Here To Order Now!

Sarbanes-Oxley Act, Synergy, and MNCs in Developing Countries

Do you need this or any other assignment done for you from scratch?

We have qualified writers to help you.

We assure you a quality paper that is 100% free from plagiarism and AI.

You can choose either format of your choice ( Apa, Mla, Havard, Chicago, or any other)