Financial resources management - Essay Example

When all information regarding the financial and functional activities is informed to the shareholders and stakeholders, no issues of corporate governance are generally seen (Attenhauser, 2008). Separation between the management and the ownership gives rise to the agency theory. The corporate governance codes are needed to realize whether the directors are on the right track for maximizing returns of the shareholders. They are also entrusted by the owners to ensure that the level of risk is maintained reasonably; this prevents the company from becoming too dominant.

Corporate governance should be elaborated as the best practice whereby a company is administered and controlled. This includes association between the various stakeholders of a company like, shareholders, management, employees, suppliers and regulators. The main goal of corporate governance is to deal with the issues that are related to accountability and duties of the company. These advocate certain guidelines assuring the shareholders that their rights are protected as well as provides with a message to the community that corporate social responsibility protects the environment in an effective manner (Mallin, 2011).

It is observed that corporate governance had evolved in United Kingdom (UK) slowly and had responded to external events, besides increasing the demand for accountability in the different sectors of the economy. There were various reports that were issued since 1992, which were nothing, but a result of the emergence of corporate governance in UK. It elaborated codes for the best practices, which constituted the Financial Reporting Council’s (FRC) Combined Code on Corporate Governance, 2003. The codes were amended in 2006 and 2008 and were subject to review in 2009 (BBC Business, 2007).

In UK, corporate governance is regarded as principle-based or voluntary approach and not a mandatory one. It is principle based, rather than