The objective of this paper is to evaluate the definition of corporation as a ‘nexus of contracts’ for interpreting its compatibility in the present modern business and thus to examine the importance of corporate governance…
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The objective of this paper is to evaluate the definition of corporation as a ‘nexus of contracts’ for interpreting its compatibility in the present modern business and thus to examine the importance of corporate governance. For verifying the assumption of the agency theory, the insights of the definition towards the theorists have been researched. It was discovered that there are various critics to this notion of the agency theorists in the modern world. The critics determined that the factor of morality has been ignored by the definition of the agency theorists. Moreover, for measuring the characterization of the definition towards importance of corporate governance, research was done and its was found that the definition has been termed as ‘misleading’ by various critics because of the fact that it incurs legal enforcement of the shareholders while at the same time shareholders hold the least power of legality among all the stakeholders. Introduction The agency theory in relation to the corporate governance represents a two-stage mode of controlling the firm. The two levels are those of the managers and the owners. This research paper is aimed towards discussing the various significant issues related to the existence of agency theory in a corporation. The paper will focus on the interpretation of ‘nexus of contracts’ in relation to the agency theory and corporate governance. ...
The use of the phrase, ‘nexus of contracts’ provides a new dimension to the corporation definition. Under this term, the problem of conflicts within a firm is observed as a unit of the contract enforcement. Agency costs are determined as the contract enforcement costs on the basis of the assumption that corporation often acts as ‘nexus of contracts’. Under this definition, the structure of the corporation is defined to be adapting to an attempt aimed towards profit maximization by way of trading among the different parties of contract that meets within the corporation (Maloney, 2003). Relationship between Nexus of Contracts and Agency Theory The definition of the firm ‘nexus of contracts’ has been provided by the agency theory. The nexus of contracts has been defined among various suppliers of a firm’s resource. The nexus of contracts presume two central parties to the agency theory. These are the principals and the agents. Principals are those who supply the capital to the firm and agents are those who manage the operational functions of a firm. Agency costs are encountered by the organization because of the reason that the interests of the two parties do not coincide. The costs of contract enforcement under this presumption consists of the cost of observing the agents’ behavior inclusive of the practices of compensation, restrictions of budget allocation and also the profit and loss because of the rules of operations and that of management restrictions (Proffitt, 2000). Insights of ‘Nexus of Contracts’ for Agency Theorists Under the assumption of the agency theory that defines a firm as a nexus of contracts, it is taken for granted that it is the self-interest of the parties which acts as a
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This research paper dwells upon the rule of corporate governance that works to ensure the accepted ethical standards are adhered to, and the best practices are maintained. Due to the high rate of alleged crimes by corporate officers, through abuse of power and high profile scandals, corporate governance has received attention in the recent years.
The case study revolves around the hiring and firing of Michael Ovitz in 1995, as president and successor to Michael Eisner after the death of Frank Wells. For a decade, Eisner and Wells shared a balance of power and authority in Disney Company, during which time the firm enjoyed a period of profitability and strong growth.
These codes have always served as the groundwork for corporate governance among UK listed companies. The Combined Code adopts the best practices stipulated in both the Cadbury and Greenbury conventions. Despite the financial scandals, the Combined Code was able to guide, though less significantly, listed companies in improving corporate governance.
Agency theory is entirely an academic term and it defines the relation and conflicts between a principal and an agent. With the help of corporate governance any corporation and company can be managed and governed. Agency theory is a part of corporate governance as corporate governance is not complete without the committee members, shareholders and board of directors of a company.
The second important component of corporate governance is concerned with normative structure of an organization. Aspects under normative framework include rules and policies that govern operation of an organization or institution. The rules originate from a variety of sources, including labor and financial market, in addition to legal or judicial systems (Claessens, 2006, p 6).
Generally categorized as internal and external stakeholders, the former is that which works within the bounds of the organization, such as management and employees, while the latter is that which although outside the organization interacts with it and possess considerable interest in it (Satzinger, Jackson & Burd, 2012, p.
The petroleum companies of Shell, chevron and Exxon Mobil management and executive teams, are charged with the responsibility of ensuring the realization of corporate governance in these organizations. They are responsible in meeting the energy requirements of society, in means that are socially, economically and environmentally viable, presently and in the long term.
The second journal is by Sundaram Anant and Inkpen Andrew titled “Corporate goal revisited”. The third journal is by Fombrun Charles titled “Corporate Governance”. The last Journal is by Blair Margret titled “Corporate Ownership” Corporate “Ownership” by Blair Margaret The aim of the article is to demonstrate corporate ownership and dispute the assumption that companies are owned by shareholders.
The rapid advent of computer applications, the Internet, and other forms of information technology have major implications for organizations and their management, but people have trouble saying exactly what effects they have and why. As for effects on public organizations, especially until recently, research has been scarce (Colley 2003).
with the developments coming so fast that everyone has difficulty keeping up with them and developing conclusive interpretations about their effects on organizations. The rapid advent of computer applications, the Internet, and other forms of information technology have major
5 Pages(1250 words)Research Paper
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