firms reflected on the inability of the managers to ensure that the overall governance mechanism was well placed within the organizations to ensure their stability and compliance with the rules and regulations. Thus normally, the focus is on the managers for corporate governance ignoring the fact that there are various power structures as well as stakeholders within the organization who can effectively dominate the corporate governance process. The role of institutional investors as well as active shareholders has therefore become more prominent after the collapse of large institutions and now they actively take part in the board meetings etc. Large investors such as institutional investors therefore play a critical role also and one of the fundamental questions to be asked as to how to achieve the balance between those two power structures of the organization to ensure corporate governance process to take its deeper roots. Thus “the fundamental issue concerning corporate governance seems to be how to
In order to properly discuss the above statement, it is critical that a comprehensive overview of the theoretical attempts made so far to discuss and originate the concept of corporate governance is discussed. One of the most potent theories that outline the potential conflict between the roles of managers and shareholders is agency theory.
The birth of the modern corporate required that there must be separation between the ownership and control of the organization. This was done with fundamental aim of taking advantage of the skill level of others who can perform the job of managing the corporate in better manner as compared to the owners.(Igor& Deborah,2010).
Agency theory basically attempts to study the nexus of different resource holders of the firm. Accordingly, a firm is just viewed as a contract between the different resource holders of the firm however, the arrangement of agency arises when principal (mostly shareholders) delegate some power and duties ...
Companies in recent years started giving greater emphasis on effective governance with a view to ensure competitive position, attract sufficient capital, guarantee sustainability, and combat corruptions. Corporate governance practices are associated with the development of financial markets, because higher level of governance in most countries are related to larger securities markets and lower costs of external finance (Tang and Wang, 2011, 47).
Al. (2010) observed in the ‘Principles of Contemporary Corporate Governance’ that “Corporate Governance refers generally to the legal and organisational framework within which, and the principles and processes by which corporations are governed. It refers in particular to the powers, accountability, and relationships of those who participate in the direction and control of a company.
However, at the same time there have been a series of events on account of high-profile collapses of companies, where the common aspect has been the high amount of remuneration paid to the top executives. The failure of corporate governance in the past, and its direct association with the high managerial remuneration has spurred a series of investigation into the matter, leading to the above mentioned recommendations aimed at bringing about significant transformations both with regard to the management pay packages as well as in the corporate world over all.
Corporate governance is undoubtedly fundamental in the organizational setting. Practices of corporate governance influence and inform the interactions and relations between various stakeholders within and across an organization or industry. This was well observed during the global financial crisis that led to the failure of banks in the UK.
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
As the report highlights that the re-evaluation has helped stringently raising the bar of Corporate Governance in the country. It is currently nearly 20 years since the introduction of the Cadbury Code and eventual simultaneous adoption by the Listing Authority and also London Stock Exchange to aid in final restoration of trust in the City.
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