The Corporate Governance Scenario in the UK With Focus on Banks - Essay Example

As mentioned earlier the area of corporate governance is of great importance and focus in the world of business today. “Most academics, business professionals, and lay observers would agree that CG is defined as the general set of customs, regulations, habits, and laws that determine to what end a firm should be run. Much more fraught, however, is the question: “what defines good corporate governance?” (A Closer Look at Business Edition: Corporate Governance. 2006). Corporations unlike its smaller counterparts like sole proprietorships, partnerships, and small and medium enterprises (SMEs) are much larger and hence more complex to govern.

Even though no owner or partner can avoid the concept of good governance, the consequences of a smaller firm going under due to poor practices are much lower when compared to large corporations. One of the main reasons is that the number of stakeholders who are affected is comparatively huge in the case of corporations. In this case, the stakeholders will comprise the employees, the shareholders, the local governing bodies, the creditors, other contractual partners, any subsidiaries and branches, the national government, management or board of directors, and the principal owners (if any).

Poor governance can affect each one of these sectors in a big way. In some localities, the economy of that place may be dependent on the performance of its principal employer, a corporation. The economy will be badly affected if such a huge employer finds itself in the red and lays off all its employees.