Abstract:
The collapse of major corporations such as Enron and WorldCom where the top management got greedy with serving their own interest over that of the other stakeholders has provided the necessary attention to corporate governance best practices that it deserved – since a long time ago. Fast forwarding to present day – a time characterized by globalization, capitalism, and profit maximization motive – the importance of corporate governance has increased manifold. Overemphasis on profit or value extraction often leads to the ignorance of the labor or human side of the equation; while this often leads to short-term profit, doing so might be harmful for the long-term growth of an entity. To investigate the effect of sole reliance on profit extraction while ignoring the governance mechanisms, the present thesis focuses on studying the corporate governance, human resource management practices, and firm performance in the textile industry of Bangladesh.
The current thesis aims to identify the interrelationship between corporate governance, human resource management practices, and organizational performance in the textile industry of Bangladesh. In fulfilling this objective, the researcher highlights the present status of the abovementioned three variables in the textile industry, measures the bi-variate relationship between these variables, identifies the mediation effect of human resource management practices on the relationship between corporate governance practices and organizational performance, highlights the key challenges with regards to corporate governance and human resource management, and recommends key measures to address the identified challenges.
The study applied a mixed method approach – a combination of qualitative and quantitative techniques – to collect and analyze data. With the use of the mixed-method approach, data was collected from the publicly listed companies on DSE from the textile industry. The multiphase process consisted of the use of questionnaire surveys, the collection of annual report data for the analysis of organizational performance, and the use of semi-structured interviews to collect qualitative data on corporate governance practices and human resource management practices. The collected quantitative data was used for descriptive analysis, corporate governance index construction, and hypothesis testing whereas the collected qualitative data was used to supplement the quantitative data collected in the earlier phases. The study finds out that even though most of the companies in the textile industry as a whole performed well in corporate governance practices (according to factual data), the performance was not that satisfactory according to the perception held by different internal and external stakeholders of the company - both with regards to corporate governance and human resource management. In further analysis through hypothesis testing, it was found out that there is a significant relationship between corporate governance practices and human resource management practices, and between corporate governance practices and organizational performance. However, no significant relationship was found between human resource management practices and organizational performance. Finally, it appeared that human resource management practices mediated the relationship between corporate governance and firm performance. With regards to challenges in human resource management in the textile sector, deficient job analysis, biased and unplanned recruitment and selection, outdated training and development programs along with whimsical training allocation, and unaccountable performance appraisal leading to unjustified and unfair compensation are some of the factors contributing the lack of structure in HRM. Simultaneously, with regards to corporate governance, poor corporate governance policy, concentrated board composition, family ownership, lack of independence of the agents and employees of the organization, and poor reporting and disclosure practices are some of the major challenging issues. In light of the discovered challenges in the textile industry, the recommended steps to be taken are bringing in multi-faceted diversity on the board, ensuring robust succession planning for the board members and the management committee, shifting from shareholder to stakeholder perspective, forming new board sub-committees, and adopting technology in HRM and corporate governance practices. By taking these steps, the textile sector of the country can embark upon the journey of practicing good corporate governance and HRM policies which might lead to robust firm performance in the long-run.
The findings of this study can assist macro-level government authorities to strengthen their oversight on the operating companies by increasing the coordination among different monitoring bodies, modifying existing policies to ensure that the consequences of non-compliance to major codes of corporate governance are severe and regularly executed, and replacing common blanket policies with customized ones for firms with different size, sales, and operating profit. Simultaneously, in the academic field, by replicating this study, authors can justify the relevance and applicability of the findings at a macro-level, in other industries. Moreover, based on the findings of this study, the applicability of the stakeholder model – shifting from a shareholder model – can be an interesting field to investigate for the researchers. This thesis makes a notable contribution in a multidisciplinary field of corporate governance, human resource management practices, and firm performance – by contributing to the literature on the developing economies.