critical role in making major business policy decisions of these

corporate companies.

Technically, shareholders elect directors who make up the board of

directors. The directors then appoint company’s top managers who
take various business decisions. However, most of the shareholders
7 Factors Determining the Inte…
delegate the voting rights to the management or do not attend the
general body meeting.

Thus, most of the shareholders regard ownership of the company as a

purely financial investment. However, in recent years in developed
countries like the United States the shareholders have come to wield a
great influence.

The bankruptcy of business giants such as Enron, World Com. in the

United States have created great awareness as well as mistrust among
shareholders. In the last few years there has been frequent law suits
filed by shareholders against directors and managers for ignoring the
interests of shareholders or in fact cheating them by not declaring
dividends. That is why there is worldwide debate on proper corporate
governance of business firms.

Factor 4# Corporate Culture and Style of Functioning of Top

Management:
Corporate culture and style of functioning of top managers is
important factor for determining the internal environment of a
company. Corporate culture is generally considered as either closed
and threatening or open and participatory.

In a closed and threatening type of corporate culture the business

decisions are taken by top-level managers, while middle level and
work-level managers have no say in business decision making. There
is lack of trust and confidence in subordinate officials of the company
and secrecy pervades throughout in the organisation. As a result,
among lower level managers and workers there is no sense of
belongingness to the company.

On the contrary, in an open and participatory culture, business

decisions are taken at lower levels of management, and top
management has a high degree of trust and confidence in the
subordinates. Free communication between the top level management
and lower-level managers is the rule in this open and participatory
type of corporate culture. In this open and participatory system the
participation of workers in managerial tasks is encouraged.

Closely related to corporate culture is the style of functioning of top

management. Some top managers believe in just giving orders and
want them to be strictly followed without holding consultations with
lower level managers. This style of functioning is not conducive to the
adaptability and flexibility in dealing with the changing external