Luca Andrade Gmez ID: 09349086059

Corporate Governance in Mexico

Corporate governance can be defined as a system by which shareholders participation, board of directors, independent auditory, legitimated stakeholders and all the direction activities in an organization are monitored, directed and regulated. All the good practices of the corporate governance are carried out with the aim of increasing the organizations value in order to facilitate its access to credit, capital and to maintain the companys perpetuity. The efficiency in the management of any corporate governance depends on the corporate responsibility, transparency, fairness and accountability, which are basic principles that can impact directly in the success of the company. The necessity of having a corporate governance arises because the employees and managers interests can differ from the organizations interests, this happens because they are not the owners of the stakes so it does not matter if the company have gains or losses, their salaries will not be affected, they will continue receiving the same amount of money for the work they perform. This way, with the creation of corporate governance, organizations can assure that the companys interests and the interests of the people that conform it are aligned. In order to effectively carry on all the activities and decisions made by the corporate governance and for its conformation organizations must select a group of members that act in a professional, honest and responsibly way so the company can achieve its goals and avoid further problems with its administration, management, legal concerns and company success. On the other hand, poor corporate governance practices and lack of ethics can affect the financial performance and market value of companies.

The existence of corporate governances is a reality in many countries of the world as it is in Mexico but its management, regulation and results can differ from one to another because the local authorities, culture, traditions, education and the way of doing business is different in each country. That is why it is important to analyze the specific way of how corporate governance works in this particular country. In Mexico the administrative and financial standards for the corporative practices are incorporated in the Code of Best Practices issued by the Business Council, its essence was taken from the OECD (Organization for Economic Co-operation and Development). This code includes some board members specific functions such as: the revision and direction of the corporate strategy, action plans, risk policies, annual budgets and investments; the selection, supervision, compensation and replacement of board members; the conflict resolution between directors and the misuse of corporate assets and abuse in related party transactions; ensuring the integrity of information systems and financial accounting of the company; the establishment of an Audit Committee to ensure effective corporate governance practices that allow for adequate supervision of the administration of the company; the insurance of a sufficient and proper process of disclosure of information within and outside the company. According to surveys made by the IMEF (Mexican Institute of Finance Executives), IPADE (Pan-American Institute of Higher Business Management) and KPMG consultancy, seven out of ten Mexican companies believe that the adoption of corporate governance is fundamental. An example of this is that a hundred per cent of the automobilist companies have a corporate governance; the sectors that follow this trend are the ones related with real estate, construction, energy, natural resources and companies listed in the stock market. This information let us now that Mexican companies believe that corporate governances are necessary for the fulfillment of the characteristics previously mentioned in this work, but the problem is that

in Mexico, ninety per cent of the companies are family business it is important to recall that the seventy per cent of the gross domestic product and eight out of ten formal jobs are generated by these companies- but the disappearance of all the family companies is due to the lack of corporate governance and preparation for the succession which can be considered as the Achilles hell of Mexican companies. Also, in Mexico only three out of ten family businesses are able to consolidate the second generation and only four per cent of it reach the third generation. Only one out of ten Mexican family businesses have more than a hundred years and less than one-third of it survive to be handled by a second generation, only fifteen per cent reach the third. While, in countries where family companies are very important as in Spain, fifty six per cent of business families have a family protocol that will help them maintain the perpetuity of their business. No matter how small or big a company is, a good corporate governance is very important for the consolidation of a solid business because it improves the structures and processes that make possible the decision making of any business, including family business. With this work we can realize that Mexican companies should implement corporate governance in order to maintain their businesses for a larger number of generations and to maintain the competitiveness not only of their companies but also of all the Mexican economy.

Sources: (n.d.). Gobierno corporativo. Energia a Debate, Retrieved from http://energiaadebate.com/reflexion-sobre-gobierno-corporativo/ Lpez Sarabia, Pablo, L. (n.d.). Efectos financieros del gobierno corporativo y tica en los negocios en mxico: Un anlisis economtrico. Retrieved http://www.dcsea.uqroo.mx/fwalla/Ponencias_Coloquio/ponencia Lopez Sarabia.pdf (n.d.). Eficiencia en la gestin del gobierno corporativo es un factor crtico para el xito de la organizaciones. Centro de excelencia en Gobierno Corporativo, Retrieved from http://ols.uas.mx/cegc/x1000 gc.asp?titulosec=22 (n.d.). Gobierno corporativo en mxico, estados unidos y alemania . Retrieved lo4.pdf Serralde, Rodolfo, S. (2009). Gobierno corporativo en mxico: Hacia una empresa ms profesional e institucional. Top Management, Retrieved from http://www.topmanagement.com.mx/modules.php?management=Go bierno Corporativo en Mxico: hacia una empresa ms profesional einstitucional&name=Noticias&file=show&clave=54213 from http://catarina.udlap.mx/u_dl_a/tales/documentos/lad/lima_t_ra/capitu from