Corporate governance - Dissertation Example

It is evident from the work of various research scholars that people felt the importance of “Corporate Governance” at least 100 years ago. For example, research scholars such as Tinbergen (1962) have raised their concern over effectiveness of corporate governance. In recent times, corporate accounting scandals in companies like Cirio, Enron, Vivendi, Ansett, Parmalat, and Pan Pharmaceuticals have forced business leaders to think about the issues like corporate accountability and corporate governance.

Above mentioned corporate accounting scandals were the results of managerial misconduct and corporate failures. Business leaders became aware of the fact that they need to take some serious measures in order to address the pertaining issues of corporate governance. . Various research scholars have stated situation-specific definition of corporate governance and so it is difficult to find one universal definition of corporate governance. Majority of the research scholars have given importance on the relational aspect of corporate governance.

According to them corporate governance is guided by the relationship between shareholders and managers. Tricker (1984) has revealed that corporate governance is different from management due to the fact that management deals with running the organization while corporate governance deals with running the organization in a proper manner. Keasey and Wright (1993) have stated that business leaders can use different tools of management, such as controlling; accountability, in order to monitor activities of agents and motivation to make them act in accordance with the expectation of the internal and external stakeholders.

Various research scholars such as Markusen and Venables (1999) have stated that there is a direct relationship between foreign direct investment (FDI) and corporate governance. According to them FDI policies of government plays a significant role on motivating foreign players to design sustainable corporate governance policy. Markusen and Maskus (2001) have stated that companies need to align their business strategy in a foreign country in accordance with the FDI policy of government of that country, in order to address the key issues of corporate governance.

In many cases it has been observed that companies manipulate their corporate governance policy in order to achieve competitive advantage in foreign countries, such as superior technology, economies of scale, managerial expertise etc over