Corporate governance - Law - Essay Example

According to Andreasson (n.d. P 2) corporate governance in emerging markets is a critical issue where companies are constantly struggling for investors to raise capital base. About the scope of governance, Abdulla and Valentine (2009, p89) point out that “corporate governance includes all types of firms and its definitions could extend to cover all of the economic and non-economic activities” p 89. This needs to be embraced by the UK in its bid to improve its corporate governance. One way by which the UK can improve its corporate governance as shall be discussed in diversity is by incorporation of corporate governance and the complexity theory which encompasses many approches integrated into the governance system.

Because the perception that the stakeholders about a company is an elastic issue that depends on the corporate image created by the company there has been experienced varying business performances by corporations in the financial and stock markets. This has led to the new wave seeking to transform the way legislative and procedural policies are made and employed by companies to stay afloat in the internal and external market. Therefore board actions on corporate management need effective monitoring so as to avert the corporate failures resulting from traditional corporate strategies as experienced in the UK capital markets.

Their short-term policies are feared to be the main reasons for the low efficiency and low return on invested capital yet the companies largely depend on public equity financing amidst their many financial access options (DoB 2010, p 10). A look at the Bitish policies on company opertations shows an emphasis on the accountability of the directors to the shareholders while they set the policies for the company (FRC 2010, p9-11). However the weakness in the Companies Act 2006 which allows for freedom by companies to adjust corporate rules using their constitutions remotely diminishes the corporate sense of the shareholders who are the main contributors of investment through public equity funds.

This calls for real improvement that will address the weaknesses that have led to failure of many corporate organisations which lies in the role played by the company directorate (Kiarie 2007, p2). Kiarie identifies the non-specificity of the management roles in the companies especially the non-executive directors (NEDs) whom she says must play an important role in checking the power wielded by CEOs based on their independance and autonomy. This is possible if the companies willingly offer relevant and sufficient information other than the one the NEDs solicit for use in decision making and judgment.

Therefore the NED should be part of the shareholder pressure on the corporate board that would enhance the value of the firm in form, of policies and strategies (Brenner, 2008 p 3-5). It is realised that most companies are reluctant to freely disclose their portfolio in the bid to cut on costs and keep competitors at bay a fact that has made the shareholdders and the NEDs in darkness on the exact positioning of the company in the corporate market in what Brenner calls “free rider problem” p 5.

This in a way has been the reason for mixed responses from stakeholders ranging