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Does stakeholder theory provide a better basis for the development of Corporate Governance in the 21st century than agency theor - Coursework Example

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Does stakeholder theory provide a better basis for the development of Corporate Governance in the 21st century than agency theor

It is important to understand the meaning of corporate governance to be able to fully discuss its features. Even though there are different variables that come into play because of the different operating environments in different nations, corporate governance may refer to that process that leads to effective control, direction and accountability in organizations. As a result, corporate governance involves elements like control, co-ordination, direction and the checks and balances associated with management of organizations. In addition to the definition of the term corporate governance, it is equally important to point out that the practice has evolved over the years to become a more complex but essential feature for the success of contemporary organizations. The concept of corporate governance has been fast adopted in various parts of the world but with some major variations because of the different circumstantial variations of nations (Clarke 2004). Consequently, there have been different frameworks of corporate governance that have emerged as a result of this. However, there are two main approaches of corporate governance that can be identified. ...
at had a tradition of common law like Australia, United Kingdom, USA, Canada and New Zealand developed corporate governance structures that focused on shareholders’ returns or interests. In their case, corporate governance was supposed to ensure that corporations achieved the objectives set by their owners. Consequently, the two main corporate governance approaches have been termed as insider and outsider approaches respectively. Having reviewed the background of corporate governance it is therefore important that the theories of corporate governance that have been put forth be discussed. Theories of Corporate Governance There are two theories of corporate governance that have been proposed by scholars and of which will form a basis for this discussion. They include the stakeholder theory and the agency theory as discussed below. The Stakeholder Theory Also referred to as the stewardship theory, the theory proposed by Freeman is based on the argument that organizations have a wider obligation of serving the general interests rather than just attaining the capitalistic goal of wealth maximization (Mulili and Wong 2011). The theory holds that firms are socially responsible to all parties that interact with it or those that are affected by the firms’ quest on achieving its set objectives (Freeman et al 2010). As a result, corporate are said to be socially responsible to their stakeholders, that is, the suppliers, employees, clients, shareholders, interest groups and the government among other industry actors they are directly or indirectly involved with. It has been noted that stakeholders are important to corporations because the manner in which they are handled determines their feedback (Gregg 2001). For instance, when they get more in terms of value or extra ...Show more

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Does Stakeholder Theory Provide A Better Basis For The Development Of Corporate Governance In The 21st Century Than Agency Theory? Insert Name Insert Grade Course Insert Submission Date Stakeholder and Agency Theory Introduction and Background Organizations tend to look for means of constant improvement of their functions and operations to enable them achieve their set objectives in the current dynamic business environment…
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Does stakeholder theory provide a better basis for the development of Corporate Governance in the 21st century than agency theor essay example
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