Monday, 9 March 2020

Concepts of Corporate Governance


Concepts of Corporate Governance

Corporate governance has now been recognized as a medium to provide the structure
through which the objectives of the company are set, deciding on the means of attaining
those objectives and monitoring performance.
Corporate governance and the enterprise culture have become important for the survival
of companies and indeed of national economies in the increasingly global economy.
As per the agency theory the shareholders are the ‘principals’ in whose interest the
corporation should be run even though they rely on others for the actual running of the
According to stewardship theory, the behaviour of the steward is collective, because the
steward seeks to attain the objectives of the organization.
All firms are adaptations to property rights institutions. In every economy, control rights
over firms are allocated between political and private actors.
There are four popular models of corporate governance related to different countries.
The mechanism of corporate governance includes structure of boards its functioning
responsibilities and its committees through which it discharges its duties.
Key elements of good corporate governance principles include honesty, trust and integrity,
openness, performance orientation, responsibility and accountability, mutual respect,
and commitment to the organization.
During the last seven years, there has been increasing concern for corporate governance.
The issue of governance heats up particularly at times when corporate frauds are detected
and reported.

Agency theory: It suggests that shareholders are the ‘principals’ I whose interest corporation
should be run.
Financial Disclosure: Reporting of financial facts and figures
Nominee Directors: They include government nominees and representatives of financial
OECD: Organisation for Economic Co-operation and Development
Stakeholder theory: The purpose of the firm is to create wealth for its stakeholders.
SOX: US Sarbanes Oxley Act
Stewardship theory: According to this theory, the behaviour of steward is collective, because
the steward seeks to attain the objectives of the organisation.

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