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Ethics, Corporate Governance and Social Responsible Investemtn - Essay Example
Finance & Accounting
Pages 12 (3012 words)
Ethics, Corporate Governance and Social Responsible Investment Name University Course Instructor Date Section A A mandatory system of governance has strict rules that must be observed by all market players. Any firm that fails to adhere to these rules is fined according to the legal requirements…
A number of other major economies have however embraced the adoption of the enabling mode of governance and rejected the mandatory corporate governance. A number of differences exist between these two systems as outlined by Anand, (2005). Mandatory corporate governance is practiced in major states of the United States, a mandatory system provides guarantee that firms in this system will have to implement any reforms that market regulators put in place. This is contrary to the enabling governance where nothing guarantees a fair play and the enforcement of implementation of any changes. Enabling governance has the ability to ensure that there is compliance to regulatory mechanisms especially when it is implemented together with mandatory disclosure of organizations practices. Mandatory system is also slightly more costly to implement when compared to the enabling governance style (Anand, Milne, and purda, 2006). Mandatory corporate governance is majorly practiced in the United States while the United Kingdom practices the enabling kind of governance. Canada and Australia are other major countries that also practice the enabling kind of governance apart of the United Kingdom. The United States mandatory governance is however a blend of the two systems. ...
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