CORPORATE GOVERNANCE Your name …………………. and Number ……………. …………. Words- 759 Corporate Governance The way companies are governed determines their success and the role they may play in the economy as well…
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Governance is the way or the structure the CEO, the owner and board of directors together with direct, control, coordinate the business in terms of managing the assets, processes and systems within the organizational setting (Pounds, 2008, YouTube video). Corporate governance is the legal as well as organizational framework, or certain principles and processes by which corporations are governed. Corporate governance thus relates to powers, accountability and relationships of those people who are involved in the direction and controlling of the corporation (Plessis, Hargovan and Bagaric, 2010, p. 4). As Tricker (2012, p. 4) pointed out, all different types of corporate entities need governing body. For a company, the governing body is its board of directors, and for other types of business firms, it may be a council, a court, a committee or an agency. Corporate governance is thus all about the way the power is exercised over corporate entities. Importance of Corporate Governance Corporate governance is more concerned with directing and controlling of corporate bodies mainly with a view to enhance shareholder value. Since the processes and systems of corporate governance lay the foundation for business growth in the future, it positively impacts the profitability and overall business performance and this is the reason why it ensures enhanced shareholder value. Firms with credible corporate governance in place are free to go about their own ways to increase shareholder values and continue to gain growth. New investors can be encouraged to invest in securities or existing investors can be motivated to expand their investments only if there is effective corporate governing system at corporate levels. Are companies run ultimately for ‘profits’, or ‘shareholder values’ or social responsibilities? This is perhaps an overwhelming academic debate. Corporate governance doctrine underlies the fact that a company must be run for ‘shareholder value’. Lynn A. Stout, a modern thinker in the field of corporate governance and professor at Cornell Law School, argued that corporate governance is more likely to amount shareholder dictatorship. She is of the strong side that ‘shareholder value’ concept of the corporate governance is not the modern corporate practice. Shareholder value thinking has in recent years been found to harm investors overtime (Stout, 2011, YouTube video). Effective governance practices are becoming sources of competitive advantage among world economies to attract wider international capital. One of the main reasons why there has been considerable prominence in corporate governance in recent years was that companies were in greater need to access all types of financial resources and also to harness the power of private dictatorship for the social as well as economic wellbeing. Good governance not only ensures better shareholder values, but also speeds up competitive adaptation. Good corporate structure to eliminate unethical behavior As to the core of corporate governance, the board of directors is supposed to fulfill three fundamental responsibilities; protecting stakeholder rights and interests, managing the risks and creating business values. These functions are closely related to eliminating unethical and unscrupulous practices that the board or agencies may practice. For
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12). The said stakeholders are similar to those of the first definition, as they include shareholders, management, and members of the board of directors, employees, customers, suppliers, creditors, and other interested parties. The definition given by the World Bank differs from the above two in that it includes the role of regulations and laws, as it defines corporate governance as a blend of law, regulation and appropriate voluntary, private sector practices enabling a corporation to attract financial and human capital, increase efficiency and fulfil its goals by generating long-term economic value for shareholders and respecting the interests of stakeholders and society (Maassen, 2002, p.
The interests of various stakeholders and shareholders were compromised by the vested interests. Roberts, McNulty and Stiles (2005) have emphasized the importance of board members of the company who are endowed with huge powers that could be easily misused.
With respect to this, it ensures that the business is conducted in accordance to ethics. Such principles should be adhered to in the decision making process while giving the right honors to the laws of the land. Fundamentally, people develop a lot of confidence and would wish to be associated with an organization that is perceived to be practicing good corporate governance.
y Board follows the principle of the corporate governance guidelines which states that the company is headed by the board and this effective board as a whole is responsible for the success of the company.
The Board is actually the representative of the shareholders and acts on
The introduction section gives general principles and concepts about corporate governance. The main body of the paper carries out a comparison of the UK and the US corporate governance models. It is divided into
The single board monitors and supervises the behaviors and actions of the company’s top management to ensure that the investments of the stakeholders are efficiently used. Unitary Board Structure is further classified into all
Nonetheless, these controls may add the scope for abuse and managerial discretion. This paper is an integrative essay that looks at corporate governance from the perspective of two separate articles.
Corporate governance can be understood through various frameworks of the firm. Agency theory is one of those frameworks, and entails the separation of ownership and control of an organisation. In this case,
More importantly, the chapter dwells on the procedures and methodologies that will be involved in working on the paper. 21
Corporate governance in general has become the new crucible in which corporations are tested and declared worthy of the trust of
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