The Evolution of International Corporate Governance - Essay Example

The paper "The Evolution of International Corporate Governance" is a good example of an essay on business. Corporate governance has become important because the survival of a firm greatly depends on the ability of a firm to adapt its governance structures to environmental changes. The corporate governance system implemented in an organization varies depending on the mechanisms used by the stakeholders of an organization to impact the society. Three major periods mark the evolution of corporate governance the first stage was dominated by the founding families that stretched from the industrial revolution until the late 1920s. The second period involved the rise of professional managers and it began in the 1920s to 1970s thereafter came the period characterized by an increase in accountability to the entire society. In the UK and US, each of the evolution of the corporate governance period was interpreted as a further step in deploying democracy into corporate governance. In recent years, corporate governance has come to depend on the consent of the individuals governed. Thus, modern has come to accept corporate governance which relies on democracy as the new model form of governance. Corporate governance, over the last two centuries, has evolved to a state that incorporates separation of power, the enfranchisement of the economy and representation, hence democratic procedures have constituted the structure of corporate governance in the modern world.

There were a series of events during the evolution of corporate governance that has created problems in enhancing corporate governance in organizations, and they include powers and duties of the board of directors, a rule that governs takeovers in an organization, roles performed by institutional investors in an organization and the compensations given to chief executives of organizations. Various political and historical factors have a huge importance in the evolution of corporate governance (Leng, 2009). Despite the building of corporate governance in developed markets to a level that addresses complex issues such as politics, law, professional associations, amongst others, in developing economies, corporate governance has failed to address these key issues. These are because these developing economies have had complex structures for ownership, presence of a vague relationship between the government and individuals in the financial sector, underdeveloped institutions, judicial systems of these economies are weak and lack of a capable human resource.

Emerging economies term corporate governance as a set that contains a formal legal framework that was modeled after the Anglo-American system. Current corporate sectors will consist of corporations formed in an instant due to mass privatization and it basically lacks both the legal and institutional structures which are essential for running corporations in market economies that are competitive. Globalization has heightened anxiety on the issue of whether corporate governance systems do confer with the competition present in the current economy (Clarke, 2007). Current business environments lack many elements that are important in the making of relationships that are competitive, this, therefore, provides an advantage to old, dominant companies and does not favor entrepreneurship and emergence of new companies. The macroeconomy has become unstable making the environment uncertain thereby making businesses to shorten their time horizon. Most managers today see their positions as temporary ones without certainty hence the opportunity they get, they maximize their profits and not the profits of the company. The state has had two roles in the transitions economies; one is limiting of post-socialism while on the other hand, it uses its power to carry through the various political programs necessary for economic transition.