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Mental, emotional, and behavioral disintegration characterize dysfunction. To put it simply, it is a handicap. When depressed, people stop engaging in their usual activities and withdraw socially. Furthermore, he has a strong aversion to food. His indoor activities consist primarily of staying inside. He cannot take his eyes off the screen. Extreme distress is a state of extreme emotional distress. Stress, anxiety, insomnia, pain, and emotional upset are all caused by abnormal behaviors. When a child loses both parents, as in a plane crash or an earthquake, they are left with no one to comfort them through their grief. Chronic sobbing, insomnia, irritability, anxiety, loss of appetite, or pain indicate a mental health problem that requires intervention.

What is the Meaning of the 4 D’s in Abnormal Psychology?

The four D’s of mental disorder are

Deviance − different, extreme, unusual

Distress − To the person with the disorder, distress is a highly upsetting and unwelcome experience.

Dysfunction − disrupts a person’s regular activities due to a malfunction.

Danger − endangers oneself or others with imminent physical harm.

Firstly, it focuses primarily on deviance. DSM IV-TR diagnostic criteria and other formal classification schemes help make sense of abnormal behavior. The diagnosis cannot be made without a sufficiently severe problem, or the second “D,” dysfunction. Regardless of its nature, the dysfunction must be severe enough to impact the lives of those affected significantly. It is important to watch for signs of dysfunction in every area of your life, no matter how unlikely they may seem.

The third “D,” distress, is associated with dysfunction because it is used as a key indicator of how severely skewed an individual’s perceptions are. The causality here is sometimes straight-lined. Despite the severe impairment, a person may experience minimal to no distress. The degree of dysfunction as perceived by the individual is more important than how the dysfunction is measured objectively. Another “D” has been added to the list, and it is a big one: danger. In order to elaborate, the risk factor can be split into two subcategories: personal and social safety threats. In terms of diagnosing, the degree of danger is always contextual. Each diagnosis has a spectrum of severity, and all diagnoses carry some degree of risk.

Pakistani culture accepts 16- or 18-year-old marriages, but Western culture does not. A person who tells jokes at a funeral deviates from statistical norms because he acts strangely, and funeral jokes are inappropriate. Threatened people are abnormal. Self-harm and violence are abnormal. Example: Mental illness causes suicide attempts. Cutting, self-harming, or knife-attacking are also abnormal.


Determining whether an emotion, thought, or behavior is fleeting or stagnant can be done with the help of its duration. This letter “D” can help doctors tell axis I disorders apart. Conditions like Schizophreniform disorder and undifferentiated type 1 Schizophrenia are like brief psychotic disorders. It is difficult for a clinician to make an accurate diagnosis of schizophrenia, undifferentiated type, in a patient with the necessary symptoms but no evidence of duration.

The p factor

In 2012, Benjamin Lahey and coworkers proposed a universal “psychopathology factor,” or “p factor.” This idea is conceptually close to the “g” factor of intelligence. Because of its dimensionality, the p factor can help rethink psychopathology as a continuum rather than a set of discrete categories of mental disorders. The accumulated symptoms could point to a wide variety of diagnoses. The p-factor can be analyzed within the context of the hierarchical psychiatric taxonomy. Recent studies have accumulated evidence for a single factor that is sequentially comorbid, recurrent, or chronic and exists on a continuum of severity and chronicity, challenging the original hypothesis of a three-factor explanation for psychopathology in general.

Higher scores on the p-factor dimension are associated with functional impairment, developmental history issues, and early-life brain dysfunction. People with high-risk factors are also more likely to have mental illness run in their families. “Find causes, consequences, biomarkers, and treatments with specificity to individual mental disorders” may be challenging due to the p factor. On the other hand, the p factor has been viewed as an index of general impairment rather than a distinct index that initiates psychopathology.

Mental Symptoms Conclusion

It would be difficult to distinguish common issues from those that rise to the level of disorders without the elucidating aids of risk, deviation, dysfunction, distress, and duration. The clinician can use the four “D’s” as a useful construct for pinpointing where, on a spectrum, a patient’s thought processes, emotions, and actions cross over from “normal” into “abnormal” and are thus indicative of a psychiatric disorder. They improve diagnostic precision and consistency by giving patients a new lens through which to interpret their symptoms. The clinician can use this framework as a starting point for creating an individualized care plan to reduce the severity, frequency, duration, and likelihood of the presenting problems. The four “Ds” are not a replacement for the DSM IV multi-axial TR’s diagnostic structure and should not be presented as such.

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Biological Model Of Abnormal Psychology

The link between a particular cluster of symptoms and an underlying impairment in physiologic function is emphasized in biological models of psychopathology. In the biological model, genetic factors, brain abnormalities, neurotransmitter dysfunctions, and other biological factors are considered the cause of psychiatric abnormalities.

What does Biological Model of Abnormal Psychology Refer?

The biological model of abnormal psychology presents a detailed understanding of biological processes as a basis of abnormal behavior. In the biological model, the thoughts and feelings of an individual are explained through the biochemical and bioelectrical processes within the body and the brain.

Importance of Biological Variables

Biological variables or factors play a very important role in determining abnormal behavior, which can be viewed from two angles. On the one hand, they can be seen as the main etiological reasons, much like when a disorder’s etiology has a significant hereditary component. On the other hand, they can also be seen as an organismic variable (i.e., individual differences) that interacts with the environment to influence the symptom of choice.

Biological Theorists Explanation of the Model

Brain Anatomy and Abnormal Behavior

Brain Chemistry and Abnormal Behavior

Let us understand the biological model through brain anatomy and brain chemistry.

Brain Anatomy and Abnormal Behavior

Brain Anatomy plays an important role in diagnosing abnormal behavior. The brain comprises billions of support cells called “glia” and about 100 billion nerve cells called neurons. The brain is divided into various regions by vast clusters of neurons. For instance, the cerebrum, which comprises the cortex, corpus callosum, basal ganglia, hippocampus, and amygdala, is a collection of areas towards the top of the brain. The neurons in each of these areas of the brain regulate crucial processes. The cortex is the brain’s outer layer; the corpus callosum connects the two cerebral hemispheres; the basal ganglia is essential for planning and moving; the hippocampus aids in emotion and memory regulation, and the amygdala is necessary for emotional memory.

Clinical experts have found links between several psychological diseases and abnormalities in particular brain parts. One such condition is Huntington’s disease, characterized by violent emotional outbursts, memory loss, suicidal thoughts, and uncontrollable bodily motions. It is related to the loss of cells in the basal ganglia and cortex.

Brain Chemistry and Abnormal Behavior

Biological experts have shown that issues with message transmission from one neuron to another can be connected to psychiatric diseases, which lead to abnormal behavior. It can be understood that electrical impulses that move from one neuron to one or more others carry information throughout the entire brain. A neuron’s dendrites, antenna-like projections found at one end of the cell, are the first to pick up an impulse. It then proceeds along the axon, a protruding fiber from the neuron’s body. Finally, it is sent to the dendrites of other neurons via the nerve ending at the end of the axon.

The neurons do not touch each other. One neuron is separated from the next by a very small gap known as a synapse, and the message must traverse this gap somehow. A neuron’s terminal is activated by an electrical impulse to release a substance known as a neurotransmitter, which travels across the synaptic space to receptors on the dendrites of the surrounding neurons. Some neurotransmitters send a signal to receiving neurons to “fire” or to start their electrical impulse after attaching to the receptors on the receiving neuron. Other neurotransmitters provide sensory neurons an inhibitory message, instructing them to cease all firing.

As you can see, neurotransmitters are essential for the brain’s ability to transfer information. Studies indicate that abnormal activity by certain neurotransmitters can lead to specific mental disorders and abnormalities in behavior. For example, Depression has been linked to low activity of the neurotransmitters serotonin and norepinephrine.

Biological Causes of Abnormality

It includes –

Genetics − Abnormal behavior can also be caused due to genetic inheritance. According to studies, schizophrenia, mood disorders, and other mental disorders may also be influenced by inherited traits. It indicates that several genes frequently work together to form healthy and unhealthy human behaviors.

Viral Infections − According to studies, schizophrenia is an illness that is caused due to exposure to specific viruses as a child or before birth. This may contribute to developing delusions, hallucinations, and other deviant behaviors. It was seen that others of many people with this disorder contracted influenza or certain viruses throughout their pregnancy.

Evolution − Theorists contend that many genes responsible for abnormal functioning resulted from common evolutionary principles. Evolutionary theorists contend that human responses and the genes underlying them have endured over time because they have aided people in thriving and adapting.

Treatments under Biological Model

Once the physical sources of abnormal behavior are identified, a biological course of treatment is chosen. Treatments may includ.

Drug Therapy − Psychotropic drugs are used for treatment and are widely used in modern times. One of the examples of such drugs is anti-depressants which are used for people diagnosed with Depression.

Electro definitive therapy − In this therapy, two electrodes are joined to a patient’s forehead, and an electrical flow of 65 to 140 volts is passed momentarily through the mind. The ongoing process causes a cerebrum seizure that lasts a couple of moments. After seven to nine ECT meetings, separated a few days separated, numerous patients feel significantly less discouragedp

Psychosurgery − In psychosurgery, there is a technique known as a lobotomy where a specialist cuts the associations between the frontal lobe and the brain’s lower regions. The present psychosurgery systems are significantly more accurate than the lobotomies of the past.


The biological model has proven valuable in adding more information to abnormal psychology. Much research has been done and is continuing to be done in this aspect. However, it also holds some drawbacks in that all abnormal behavior cannot be attributed to the biological factors of the individual. Therefore, the model has pros and cons and is of great importance.

Hypnosis Psychology: Definition And Meaning

Hypnosis is an artificial created state of a human being in which, a person’s attention is highly focused, and he or she may experience a state of deep relaxation and a heightened state of suggestibility. This can make it easier for the therapist to communicate with the person’s unconscious mind and make suggestions for positive change. Furthermore, hypnosis technique has been used for a variety of purposes, including reducing anxiety and stress, helping people overcome phobias and addictions, and managing chronic pain. It is often used in conjunction with other forms of therapy, such as cognitive-behavioral therapy or psychotherapy, to help people make lasting changes in their lives.

What is Hypnosis?

A mental condition known as hypnosis is characterized by intense concentration, decreased peripheral awareness, and increased suggestibility. The professionals use a wide range of methods to induce this condition. Hypnosis is frequently used to aid in relaxation, to lessen the perception of pain, or to induce some desired behavioral change by capitalizing on the power of suggestion.

With the use of soothing verbal repetition and mental images, therapists can induce hypnosis, also known as hypnotherapy or hypnotic suggestion, and assist the patient into a trance-like condition. After calming down, patients’ minds are more receptive to life-changing information. It’s important to note that hypnosis is not a form of mind control, and people remain in control of their actions and decisions while in a hypnotic state. Some people may be more receptive to hypnosis than others, and the effectiveness of hypnosis can vary from person to person.

History of Hypnosis

The history of hypnosis is as old as the history of magic, sorcery, and medicine; in fact, all three have employed hypnosis as a method. However, the credit of incorporation of hypnosis in psychological study is goes to Franz Mesmer, a German doctor. Mesmer utilized the technique of hypnosis in the treatment of patients in Vienna and Paris during the later half of the 18th century. Mesmer was quickly teased for his false assertion that hypnotism relied on an occult power (which he called “animal magnetism”) that passed through the hypnotist and into the victim, but Mesmer’s technique, also known as mesmerism after its inventor, continued to fascinate many psychologists as well as medical professionals. In the middle of the 19th century, when the English physician James Braid studied the phenomena and developed the labels hypnotism and hypnosis, after the Greek deity of sleep, Hypnos, the technique became very popular and lots of physicians used it even without completely understanding its nature.

In the 1880s, hypnosis gathered significant scientific attention from all around. Hippolyte Bernheim, a professor of medicine at Strasbourg, supported Ambroise-Auguste Liébeault, an unknown French rural doctor who employed mesmeric methods. They had independently said that hypnosis technique was a mix of psychologically mediated reactions to suggestion rather than involving any physical forces or physiological processes.

Furthermore, the therapeutic promise of hypnosis for neurotic diseases intrigued Austrian physician Sigmund Freud on a trip to France during the same period. He employed hypnosis to aid neurotics in remembering upsetting memories that they had apparently forgotten after returning to Vienna. However, when he started to formulate his theory of psychoanalysis, Freud abandoned hypnosis in favor of free association due to theoretical reasons and the difficulties he had in hypnotizing some of his patients. Moreover, in today’s contest, the psychoanalysts see hypnosis as only a supplementary tool to the free-associative methods employed in psychoanalytic treatment.

Despite Freud’s influential use of hypnosis and subsequent rejection of it, the practice was occasionally used in the psychoanalytic therapy of soldiers who suffered battle neuroses in World Wars I and II. Later, hypnosis gained a few more restricted medical applications. Although several scholars have proposed various hypotheses about what hypnosis is and how it may be understood, the phenomena currently lack a widely recognized explanatory framework.

Types of Hypnosis

The process of inducing hypnosis can be done in a number of different ways−

Guided hypnosis − In order to create a hypnotic state, this type of hypnosis uses instruments like music and recorded instructions. This kind of hypnosis is frequently used in websites and applications for mobile devices.

Hypnotherapy − To treat illnesses including depression, anxiety, post-traumatic stress disorder (PTSD), and eating disorders, qualified doctors and psychologists utilize hypnotherapy, which is the use of hypnosis in psychotherapy.

Self-hypnosis − When a person generates a hypnotic state within himself, self-hypnosis takes place. It is frequently used as a self-help strategy to manage stress or control discomfort.

Myths About Hypnosis

It includes −

Can someone behave against their will when under hypnosis?

Through a sociological experiment, researchers Martin Orne and Frederich Evans sought to provide an answer to this query. The control group in this experiment was not hypnotized (which was not shared with the laboratory assistants). The hypnotized and unhypnotized groups received the same treatment. What was the outcome, then? The non-hypnotized individuals behaved in the same ways as their hypnotized counterparts.

Can hypnosis aid in the treatment of pain?

Yes, it can, in a nutshell. It has been demonstrated that hypnosis has the power to stop the brain’s processing of pain. Previous studies on surgical procedures have revealed that hypnotic patients recovered more rapidly, used less pain medication, and even left the hospital sooner than those who weren’t hypnotized. According to research, 10% of people are capable of being hypnotized to such a degree that significant procedures can even be carried out without anesthetic (Myers, 2014).

The Effect of Hypnosis

Hypnosis experiences might differ greatly from person to person. Researcher Ernest Hilgard’s experiments showed how hypnosis may be used to significantly change perceptions. The participant’s arm was then submerged in freezing water after the hypnotized person was told not to experience discomfort in it. The hypnotized people were able to leave their arms in the chilly water for a number of minutes without feeling any discomfort, however, the non-hypnotized people had to take their arms from the water after a few seconds owing to the agony.


Hypnosis, which is one of the well accepted techniques of treatment of many psychological disorders, is the process of altering a person’s level of awareness, and it can change how feelings, actions, or ideas are perceived. Hypnotherapy is frequently used to treat anxiety and depression as well as undesired behaviors and stress-related responses.

The Manovigyan: Ancient Indian Understanding Of Psychology

Meaning of Manovigyan

India’s immense information base psychology has access to is still separated from the Indian philosophical writings. Given these religious texts and books, the potential for creating theoretical approaches to oneself and human growth is enormous. In India, psychology is returning to its roots around the beginning of the new millennium, and a new era appears to be dawning. Academic psychology has remained an alien field in India for about a millennium. Psychology was completely acquired from the West around the turn of the 20th century and was introduced in 1916 at Calcutta University.

Indian research developed for a considerable amount of time on the foundation of the Western perspective of investigation and instruction. It has taken a long road for Indian psychologists educated in western art to return to their roots and adopt Indian notions and ideas pertinent to comprehending Indian sociological phenomena. In fact, throughout this lengthy history, reservations have occasionally been raised about the need to integrate psychology with modern cultural difficulties to deal with the difficulties posed by accelerated socio-economic and worldwide developments.

Psychology has spent its entire time like an alien graft attempting to anchor to Indian soil and fit in with the environment. This implantation has expanded throughout the years, with tendrils appearing all around the nation. However, in terms of the actual problems of nation-building, it has yet to produce the desired results and has mostly stayed an academic endeavor. Psychologists’ absence from many national arenas raises major questions about their relevancy and viability. A greater grasp of the present incarnation is necessary to determine the type of psychology we hope to have in the twenty-first century.

Development of the Field

The slow development of academic psychology in India is explained using three justifications. One that is more forgiving is the absence of an intellectually encouraging environment.

Any academic endeavor is viewed as marginal in a nation where a significant portion of the population suffers from inhumane destitution and choices on societal development initiatives are made for political reasons. Education systems beset by an increasing youth population, bureaucratic scheming, and a funding shortage have progressively degraded into non-performers. Competency in research and teaching should be prioritized.

The question of “why psychology in India lags behind most sister sciences, such as sociology, anthropology, and economics,” however, is left unanswered by this. The second pathway is that psychology is a scientific field with some inherent limits. Its focus on micro-level issues and overzealous adherence to empiricist-positivist approaches have constrained the breadth of its psycho-social research. For more practical macro-level issues, this methodology needs to be revised. The narrow scope of the discipline eliminates the necessity of working in practical scenarios or with official or quasi-organizations.

Psychology course availability in colleges and universities has yet to be discovered. Psychologists are engaged in their careers. There is no information that legitimate organizations, including the Indian Council of Social Science Research, the University Grants Commission, or the Department of Technology and science, can provide. According to one assessment, throughout India, there are around 15,000 psychologists. Whatever the scenario, India has the greatest among all psychologists outside of the Western Balkans, and she is regarded as a “publishing giant” in developing nations. Numerous aspirations and anticipation about the discipline’s significant application to the accomplishment of programs aimed at constructing nations have been sparked by its explosive development.

The investigation of subjective experiences and their substance was a topic that was widely documented in ancient Indian scriptures. This ancient exposition’s key distinction is that it emphasizes experiential learning and is the culmination of a lengthy heritage of self-verification. The medieval Indian texts did not establish a rigid division between philosophy, religion, and psychology. The main objective was to support people in their quest for self-realization and freedom from life’s hardships. This philosophy emphasized discovering the “world within” to lessen suffering because it assumed that all pain originated within each individual. To find an enduring equilibrium of the spirit, mind, and body to experience eternal enjoyment. To achieve this, the yoga system developed extremely complex mind-control strategies. This large study area is considered “Indian Psychology” in modern literature.

Journey of Psychology in India

Indian philosophical and artistic heritage is a living force that has endured uninterrupted from ancient to modern times. Multiple thought traditions in this history included psychological phenomena as a fundamental component of disciplined inquiry and analysis.

British hegemony from 1857 to independence in 1947 weakened the vitality of this culture by demeaning its worldview and disciplines in Anglicized schooling institutions. Continental psychology was extended to the Indian subcontinent under the British administration, where it took hold and flourished. Traditional methods, which were long neglected, are now receiving attention and being made known to the globe. It is essential first to clarify some substantial and artistically different elements of Indian psychological approaches since the cultural setting in which they arose differs from the European backdrop of contemporary psychology.


Indian psychologists have made some important breakthroughs. When contrasted with an Indian ideology belief, the foreign ideological stance of current psychology is different in that it offers a variety of viewpoints on existence and death, awareness, human behavior, and values; in such a way that the western style of thought-belief psychology appears on the outside to be overly worldly.

As a result, some theories and books may have little practical application compared to India’s psychological context and demographics. To examine data more effectively and thoroughly, qualitative and numerical data should be analyzed considering the relevance of Indian philosophical underpinnings. One major issue that has to be addressed is the dearth of literature in Indian psychology.

The Psychology Of Urgency: 9 Ways To Drive Conversions

Using urgency as a tool to drive conversions

Successful marketing strategies focus on changing the way target audiences behave. To do this well, marketers need to understand how people think. It’s no wonder, then, that the most effective marketing principles have their basis in psychology. One of the most relevant psychological principles that can be applied to eCommerce is urgency.  In this blog post, we unpick the psychology of urgency and show you nine ways you can use it to increase conversions.

How urgency influences behavior

When a task is urgent, people are more likely to act on it. Interestingly, this is even the case when the sense of urgency is artificially created.

Five experiments in a 2023 study showed when unimportant tasks are characterized by spurious urgency (e.g. an illusion of expiration) people are more likely to perform them over more important tasks.

Why is urgency important in eCommerce?

In the digital age, customer journeys are complex. The buying process meanders between multiple channels and devices. It’s rarely linear.

What’s more, the journey to purchase is often lengthy. With such a breadth of choice and range of prices, customers may take days, weeks, or even months researching options.

Adding elements into the customer experience that create urgency speeds things along. It pushes those considering buying to do so now, to avoid missing out.

9 ways to drive conversions with urgency

Keen to harness the power of urgency? Here are nine tactics you can implement to boost conversions:

1# Setting deadlines

Restricting the time shoppers have is an effective way to trigger urgency to buy.

Researchers in a 2006 study found that shorter time limits create a greater sense of urgency which lead to higher purchase intentions.

Setting deadlines is an easy way to implement this tactic. Some examples include:

setting a deadline for next-day delivery

sending discount codes with a set deadline

promoting the date or time your sale ends

2# Using countdown timers to flag deadlines

Having set deadlines, try adding a countdown timer to ensure your customers notice them.

Counting down to a deadline prompts action. As the hours, minutes, and seconds tick by, the urgency to buy builds.

Neuroscience Marketing reported on a test where adding a countdown timer (showing how much time was left for next-day delivery) increased revenue by 9 percent.

Here are seven ways to use countdown timers if you need some inspiration when it comes to implementing this tactic.

3# Highlighting potential price increases

The threat of having to pay more tomorrow, prompts people to buy today.

This works particularly well in travel. Try adding alerts that display how many rooms left at “x price” or how many “economy seats” left on a flight.

4# Showing scarcity

Scarcity is a persuasive way to make customers want to buy now.

A 2023 study notes that under perceived scarcity conditions consumers exhibit urgency to buy. What’s more, scarcity triggers a response so primal that in-store shoppers will try to hide items so they don’t miss out!

You can demonstrate scarcity online by highlighting when items are low in stock.

You can take this a step further by setting up triggered emails to let customers know that items they’ve recently browsed are running low.

5# Using real-time behaviour as social proof

Showing the real-time behavior of other shoppers is a powerful way to create urgency to buy. For example, showing how many people are viewing a product as customers browse.

Psychologically, this tactic works on two levels. Firstly, it’s a form of social proof, and social proof drives sales. A 2013 study found that displaying social recommendations delivered close to a 13 percent increase in revenue.

Secondly, it triggers FOMO. People hate the idea that they may miss out on something their peers have already got.

This is particularly effective in travel where there are limited numbers of hotel rooms and flights are available on any given day.

6# Writing time-related copy to prompt action

Well-written copy is powerful. Words are an important way to change behaviour.

Optimize your copy for urgency by using the right language. Time-related words and phrases are key.

You don’t need to re-invent the wheel here. Getting too clever with your copy can sometimes reduce its impact. Tried-and-tested phrases are the way to go. For example:

don’t delay

don’t miss out

offer expires

ends soon


save today

buy now

one day only

last chance

Used in conjunction with attractive offers, these words and phrases highlight what customers could lose out on if they don’t buy now.

Copy framed around avoiding loss taps into the psychological principle of loss aversion. People prefer to avoid losses than acquire gains.

7# Notifying people that carts will expire

Sometimes shoppers get distracted during the checkout process. Travel or events brands can counter this by adding a countdown timer that puts a time limit on ticket checkout.

Retailers can add a sense of urgency to cart abandonment emails by letting customers know items will only be held for a limited time.

This tactic hooks into the fact that customers have already invested time picking out items and putting them in their cart. They’ll lose this time if their cart expires. And people hate losing time.

A 2009 article reported on a study that found losing time tends to be more painful to people than losing money. The leading researcher, Professor Mogliner, noted that “time is a more scarce resource — once it’s gone, it’s gone — and therefore it’s more meaningful to us”.

The prospect of losing time invested in filling their cart may help get shoppers over the pain of spending. This helps push them over the line.

8# Having flash sales

Having a flash sale is an effective way to build urgency, boosting conversions and your bottom line.

Flash sales are urgency gold. They tap into three of the key psychological principles we’ve already explored:

loss aversion


limited time

Use a countdown timer on your website and in your emails to ramp up the urgency throughout the flash sale.

9) Showing when items are out of stock

The majority of eCommerce businesses hide out of stock items on their category pages. Surprisingly, going against this could boost conversions.

Showing out of stock items can motivate people to buy other related items. That said, it’s important to get a balance.

Showing lots of items that can’t be purchased may cause frustration. But showing just a few may trigger FOMO and therefore urgency to buy.


Strategic use of urgency can significantly impact your conversion rates. Implementing the tactics explored in this post is a good place to start.

Want to learn the secrets behind high converting eCommerce websites? Check out Pure360’s Guide to eCommerce Revenue Growth.

What Is The Meaning Of Corporate Governance?

It is also an interesting topic of study, and much has been written about it in recent years, especially when it comes to bad governance.

Regardless of the type, size, or purpose of a company, all board members are responsible for ensuring that their organisation’s governance is fit for purpose.

A simple description of corporate governance

Corporate governance is what a board of directors handles and reports on.

There are different areas where boards can look at their effectiveness, and one of these is the strategic focus.

The board must anticipate the future needs and sustainability of the organisation and develop an overall mission and vision.

The board must also seek a wide variety of inputs from different team members and be good listeners.

Finally, the board members must prioritise the interests of the organisation above any individual needs.

Everyone on the board should be clear on their roles and responsibilities.

Read more: The eight great duties of a board member.

What is good corporate governance?

Good corporate governance also means the directors examine the market and the regulatory and social environments they work in to build practices and procedures that meet the sustainable needs of all stakeholders.

Three essential questions the board of directors must answer as part of their governance are:

Who has the power in a company, and who makes the decisions?

Are the correct decisions being made?

How are employees and directors compensated, and what controls are in place to ensure all stakeholders’ interests are met?

Good corporate governance is essential when we look at what happens when there is bad corporate governance, which can cast doubt around a company’s operations and profitability.

Good corporate governance seeks to balance individual, social, and economic goals to ensure positive and sustainable outcomes for all.

Read more: The importance of good corporate governance. 

What are examples of bad corporate governance?

Over the past decade, corporate scandals resulting from bad governance have dominated the news cycle more than ever.

Significant sexual harassment, product recall, corporate negligence, and fraud cases reveal larger, pervasive problems – these incidents are not isolated incidents.

Amid the widening income inequality following the Great Recession in 2008, many corporate CEOs and other leaders have acted in ways that have brought shame and near ruin to their organisations.

Here are five examples of what happens due to bad corporate governance:

1: ​​The Foxconn suicides in 2010

The Foxconn plant in China, where Foxconn manufactures parts for iPhone, PlayStation 4, and Xbox One, reported 14 suicides in 2010. Foxconn’s U.S. customers, including Apple and Hewlett-Packard, were threatened by the scandal and their reputations burned.

2: The FIFA corruption scandal 2023

3: The Volkswagen emissions scandal 2023

Volkswagen models had been found to emit poisonous nitrogen oxides in illegally high levels. Illegal software was found in the polluting cars that would detect when they were being tested and alter their performance to pass the test. Eleven million vehicles were believed to be equipped with the software. VW was fined over $25 billion in the United States and had operating losses of $1.77 billion in 2023.

4: The Wells Fargo account fraud

According to the Consumer Financial Protection Bureau, Wells Fargo employees opened approximately two million unauthorised credit and deposit accounts between July 2023 and September 2023. The company opened tens of thousands of accounts without customer consent to achieve sales targets and other incentives. In addition to transferring funds from authorised accounts to the unauthorised accounts, they charged the unsuspecting customers fees and additional charges.

As a result of the phoney accounts scandal, Wells Fargo was fined over $2 billion, more than 5,000 workers were fired, and CEO John Stumpf stepped down.

5: The Facebook-Cambridge Analytica data scandal

According to two articles published simultaneously by The Guardian and The New York Times on March 17, 2023, Cambridge Analytica harvested data from over 50 million Facebook profiles to help Trump’s election campaign. Facebook was engulfed in several significant scandals since 2023, creating distrust among Americans, and 44% of Americans now believe Facebook divides the country.

What are the principals of corporate governance?

Corporate governance is a system of rules and practices, which help direct and control an organisation.

The principal of good governance seeks to balance the interests of all stakeholders, such as customers, suppliers, and employees. Corporate governance is the primary responsibility of the company’s board of directors.

Board members today are under increased public scrutiny and must be aware of the risks in their environment. They must also operate in a way that is accountable, transparent, and fair. Their most important job is to ensure that the CEO and the management team are operating within the law and in the best interest of stakeholders.

The practice of good governance means setting up good rules and practices, which is highly important in terms of investor relations since it shows integrity and helps companies build trust.

Excellent and transparent governance ultimately helps the organisation to remain financially viable in the long term. Communicating good corporate governance to external stakeholders is essential.

Profitability will not be the only area investors look to for the health and strength of the organisation. A business must demonstrate good corporate citizenship through sustainable and ethical practices in the community. This is known as ESG or environmental, social and governance.

Who is responsible for corporate governance?

The board of directors is the central entity responsible for corporate governance. However, some of this work may also be done by committees appointed by the board.

The board’s role is also to manage the relationship between the organisation’s owners and its managers and employees to avoid conflict, set a high standard for performance, and ensure fair practices.

Why should companies invest in improving corporate governance?

Without good corporate governance, a business can quickly ‘go off the rails and end in disaster. Investors like to see companies that invest in good corporate governance. A big warning sign for investors and regulators is when a company is seen not cooperating with auditors.

Good corporate governance has positive effects:

Corporate governance involves the practices put in place and managed by the board to ensure sound risk management, transparency, and ethical practices.

Corporate governance involves the rules and practices through which the company is controlled.

Good corporate governance results in substantial economic growth and corporate success, improved investor confidence, an ability to raise capital, lower risk, and improved share price.

How to join a board of directors

With an increase in scandals involving corporate boards and charities, the roles and responsibilities of boards and directors are coming under more public scrutiny.

To serve on a board, you should understand how a board works and your responsibilities, which can be accomplished by taking a Diploma in Corporate Governance.

Ultimately, the board of directors is responsible for the organisation’s overall governance, management, strategic direction, and accountability.

Across all global markets, the demand for effective, accountable board members is surging. In recent years, investors have become increasingly demanding of company boards, and we expect this trend to continue.

Increasingly, directors are reviewed for their industry knowledge, understanding of challenging issues like ESG, and their experience in transforming companies.

There will also be more pressure on organisations to disclose their board competency priorities, succession plans, and the diversity of their director candidates.

The message is clear – investors and other stakeholders want effective boards filled with people who have industry-specific talents and boardroom skills.

How to become an effective board member

An effective board member needs to understand how effective boards function.

Through the Corporate Governance Institute’s Diploma in Corporate Governance, you gain access to the latest thinking and methodologies used by the most admired boards in the world.

Watch the short video below to see David W Duffy, founder of the Corporate Governance Institute, explain what makes a great director.

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