CORPORATE GOVERNANCE AT BEST BUY 3
Running head: CORPORATE GOVERNANCE AT BEST BUY 1
Corporate Governance at Best Buy
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Corporate Governance at Best Buy
Best Buy is a multinational corporation that deals with consumer electronics based in America. It has other intermediaries in Canada, Mexico, and China, among many other countries. The company mainly deals with items from technology companies such as Apple Inc., Verizon Wireless, Sony, HP, and Microsoft, among many others. The main goal for the organization created a store where people can access a wide range of products and services under one shopping place. Like all other companies, Best Buy has its corporate governance issues within the organization, especially owing to the closure of some branches recently like the some in China.
The first corporate governance issue is a conflict of interest. The transition of leadership of the company has been so slow, leaving leaders to maintain their positions for long periods. Some even still form part of the board even after their retirement. During the 1990s when the company was going through a recession, the leadership of the company was maintained under Dick Schulze, who served as the CEO from 1966 to 2002 (Hitt, Ireland, & Hoskisson, 2013). Leadership transition in the company involves internal promotions.
The second corporate governance challenge that Best Buy is facing is the issue of oversight of the firm’s activities and long term success. The company considered opening stores abroad as they tried to diversify without considering some of the items. For example, the company opened its subsidiary in China and Turkey, without because Chinese prefer small retail shops than big stores. Due to the poor performance of the company, consideration was made that the subsidiaries be closed down.
The two challenges that are, conflict of interest and oversight issue qualify to be corporate governance issues in several ways. The first thing is that these two issues arise from the leadership of the organization. Corporate governance deals with how a company is being run, and therefore, anything touching the leadership will become a corporate governance issue (Tricker, 2015). Since the transition of leadership isn’t clear and also the oversight of the future company’s success is not considered, these two become corporate governance issues.
For the company to solve this issue, several recommendations are to be made. The first thing is that the company can incorporate in their constitution the transition strategy for each leader and also promotion strategies so that they avoid the issues of one person occupying a position for long. For example, they may constitute that the maximum years the Chief Executive Officer can serve is for fifteen years, after which, they may join the board at their wish.
The organization can also create a survey team which will aid in foreign markets. This will address the issue of lack of oversight. These teams, for example, can be given the responsibility to be surveying new markets, especially the abroad ones, and device ways of utilizing the market at optimum. They don’t have to follow their structure, but they can see how to fit the market demands of the specific company. Therefore, the oversight of the company will be taken care of, and future success is considered.
In conclusion, from the case study, Best Buy has two corporate governance challenges, conflict of interest, and oversight. The leadership transition is minimal as leaders maintain their positions for a long time. The other thing is venturing into new markets without considering the foreign markets. It is recommended that the company incorporates a structure for a leadership transition in the company and to form a survey team for the organization.
References
Hitt, M. A., Ireland, R. D., & Hoskisson, R. E. (2013). Strategic management: Concepts and Cases: Competitiveness and globalization (10th ed.). Mason, OH: South-Western Cengage Learning
Tricker, R. B., & Tricker, R. I. (2015). Corporate Governance: Principles, policies, and practices. Oxford University Press, USA.