The role of legal systems in corporate governance - Essay Example

A Legal system is composed of a constitution, the different types of legislative bodies and legislation that is done by subsidiary law-making bodies like county authorities that carry out legislative duties such as the creation of by-laws (Brealy et al, 2007). Most legal systems in the world have two different branches that include civil law that deals with the law of torts, divorce law and the common law branch that deals with the commission of crimes and felonies. The judiciary is used for the determination of cases that fall in both civil and criminal law.

The laws that deal with the collection of taxes and the administration of the tax laws fall under tax laws. Corporate governance has the stewardship approach where management is viewed as the stewards of the organization in terms of the asset management and employment as well as deployment of such assets in a manner that is consistent with the overall strategy of the organization (Enneking, 2012). It also sets out the accountability of the company towards the relevant authorities. Most companies are required to have a document setting out the corporate governance structure and policy.

Corporate governance also entails the management of challenges that arise from separation of an entity’s ownership and its control. This discussion will focus on various issues; to begin with it will provide elaborate information in regard to the impacts of legal systems on corporate governance. Moreover, it will attempt to describe the effects of these systems on monitory unions and MNE firms. Background information shall also be provided that delve with legal systems as well as corporate governance.

Legal systems affect almost every aspect of the society; one of the societal aspects that is affected by these systems is corporate governance. It is therefore crucial to research and determine the effects of legal systems on corporate governance