Today Marsh & McLennan Companies, Inc. (MMC) can be considered as one of the world’s largest insurance agency and professional services firms. The researchers agree that its success depends on the effective practices in corporate governance. The main principles of the corporate governance are separation, independence, and control. Thus, the company has separated the Chairman and CEO positions to avoid conflict of interests and for the benefit of the Board and shareholders. The Board accentuates the fact that the Chairman is an independent director, but the efforts of the Chairman and CEO should be combined for achieving the best results in controlling (Marsh and McLennan Companies, Inc).
Moreover, the Board believes that the Company’s directors should also be independent of the Company in order to have the opportunity to make the objective decisions. Another significant initiative of the company is the declassification of the board. Today the Board is elected by the stockholders to control the management and other business processes in the company (Marsh and McLennan Companies, Inc). However, several years ago, only one third of the Board was nominated on an annual basis. Thus, MMC moved to diversifying the Board so that it would not have the full power because of the necessity to preserve the balance between the forces in the company (Marsh and McLennan Companies, Inc).
There is also the tendency provided by the directors’ committee to constantly change the directors’ selection criteria in order to fit with the company’s strategy in management and marketing and the Board’s needs. Furthermore, one more distinctive feature of the company’s management is the rational discussions between the Chairman and the Board on the problems of the company’s needs. Besides those initiatives, MMC board allows the shareholders calling for a special meeting for shareholders in order to provide the discussions of the urgent issues (Marsh and McLennan Companies, Inc).
To analyze the potential risks for the companies in the corporate governance, it is necessary to pay attention to the international example of the ineffective corporate governance which can lead to the company’s failure. Several years ago Pasminco was one of the most successful companies in Australia specialized in producing resources, especially zinc. However, the ineffective corporate governance led to the company’s collapse (Brown).
Today many economists and researchers determine several factors which can be considered as influential for the corporate decline because they affected the company as a complex (Brown; Wong). The first aspect is the ineffective management of the company. The Board was inclined to hesitate in making the necessary decisions and following the inappropriate strategies. Moreover, the researchers accentuate the low standards in the company’s management which are not competitive (Brown).The lack of accountability and transparency of operations and information led to the development of declining tendencies in the company. The next aspect involves the inadequate financial control, and as a result, inappropriate accounting and poor budgeting within the company (Wong).
These factors resulted in the changes of the situation within the market. Pasminco became to fail in planning the sales and demands, thus, the costs were not recovered. The situation was complicated with the changes in the value of the $A according to which the company planned its activity, but failed trying to develop the strategies against these changes (Wong).
Brown, Christine. The Collapse of Pasminco: Misjudgment, Misfortune and Miscalculation. 2011. Web.
Marsh and McLennan Companies, Inc. 2011. Guidelines for Corporate Governance. Web.
Wong, Kit. “Currency Hedging with Options and Futures”. European Economic Review 47 (2003): 833-839. Print.