Question

Bus499 W8

Corporate governance has become a hot issue in the U.S. over the past two decades. From your analysis of the case study, determine two possible corporate governance challenges that might be faced by Best Buy as a result of its rapid growth and why they could become corporate governance issues. Make recommendations for how Best Buy can overcome these challenges. Provide specific examples to support your response.

Answer 1

The corporate governance issue faced with Best Buy was externally all over the media and its effect can be felt everywhere. When the prices of the shares of the company were on a major decline mode, Best Buy was paying its executives bonus and stock options worth $2 Million. This was considered to be vague when the company faced a lot of stiff issues on its operational front. This was taken as the company’s negative policies against the shareholders as well as the stakeholders in the light of corporate governance issues. Corporate Governance seeks companies to produce differences in society and to make things better and efficient for them. They seek transparently and accountability from corporations. None of such elements were found with the Best Buy rather it was more of vague and directionless decisions being taken by the management.

In order to provide better Corporate Governance within the company, the Company should tread on the lines of better operations by providing the customers with the latest trend of shopping that is online purchasing, e-commerce, and better facilities. This would have reduced the costs of companies by spinning off shops that were not utilized fully and also by reaching to the customers worldwide. The only hurdle would have been distribution part which could have been outsourced initially and later could have been done in-house. The company and the management should have taken decisions pertinent to their operations as well as corporate governance by aiding towards the society rather than feeding themselves out of the profits. This would have turned the scenarios upright and the financial figures would have looked better in the exchanges. The shareholders would have continued to maintain their faith as the industry was booming with online marketing and as the Company always maintained their goodwill, so the investors would have kept their faith intact. Moreover, the decisions of compensation and stock options would have been postponed and curtailed and the money could have been utilized for expansion. This would have helped the company to enrich their capital investments for the future which was absent in the present case and also would have made things better for the corporate governance part.