Influence of Corporate Governance on a Companys Performance - Literature review Example

The paper "Influence of Corporate Governance on a Company’s Performance" is a good example of a literature review on finance and accounting. Corporate governance has a great role to play in determining the performance of any existing company. Maxwell (45) outlines that corporate governance is a key issue organization as it affects all the individuals that have an interest in the organization. All these individuals have a great role to play in the corporate governance of the organization. Johnstone (34) also states that corporate governance practices are mainly the central focus of an organization as it determines its performance as well as reputation. There are several principles of corporate governance that should be understood by every organization to enable them to survive in this very competitive corporate world.

The company’s stakeholders, the board members, the audit committee and all the employees determine the manner in which the company is going to be governed. The principles of corporate governance should be applied at all levels of management to ensure the company’s operations run without any interruptions whatsoever. The most important aspects of corporate governance are good communication channels, disclosure, and transparency among others. Johnstone (309) outlines communication as a key thing in a company hence the need to ensure that the communication channels are well defined and understood as well. A proper communication channel prevents unnecessary conflicts that may arise due to misunderstandings and misinterpretation of information.

A company with good corporate governance has a lot of benefits that it enjoys as this puts it in a better position than its competitors. For instance, a company with good corporate governance earns itself a good reputation and the long term benefit of this reputation is that it attracts investors to the company. Another benefit of good corporate governance is that it eliminates the costs of dealing with legal issues. This is mainly because a company will comply with the law to avoid lawsuits and penalties. Good corporate governance also minimizes risks that come with fraud and other malpractices that are likely to occur (Johnstone, 345).

There are some governance issues that mainly arise in organizations and they include conflict of interest, corruption, Poor decision making and Government interference. Johnstone (345) outlines that different organizations use different corporate governance systems depending on their preferences. For instance, some corporations use the stakeholder’s approach where the company’s employees are the most important to the organization. On the other hand, some organization uses the Shareholders approach where the company’s investors are the most important to the organization.

An example of a company that uses the Shareholder’s approach is Nintendo Company which is a Japanese company that makes electronics and distributes them worldwide. In this company the investors are the most valued and the top management is under close supervision to ensure that they act in the best interest of the company’s shareholders. The management is accountable and this ensures that cases of mismanagement are minimal. This kind of approach is the most common approach in Europe and the Middle East countries.

Another example is Allergan is an American based company that produces neurological products in America. This company uses the stakeholder’s approach where the employees are the key focus of the organization. They ensure that the employee's welfare is well taken off and it well known for retaining its employees for a long period. It rarely lays off its employees, unlike other companies. In conclusion, irrespective of the approach that a company should ensure that it has good corporate governance is upheld. This ensures that the company becomes the most preferred by both investors and other key stakeholders such as the customers, suppliers and even the company’s partners.