Assignment #3. 1.Corporate Governance Is A Set Of Rules

In order to ensure effective regulation, the Sarbanes-Oxley legislation contains eleven sections that describe responsibilities of corporate boards (Engel, Hayes, & Wang, 2007). In case these responsibilities are not performed, criminal penalties are applied. The need for stricter financial governance laws created the global trend and such countries as Canada, Germany, France, Australia, Israel, Turkey and others also enacted the same type of regulations (Damianides, 2005). Today, the Sarbanes-Oxley legislation continues to play a fundamental role in the process of protecting the rights of investors and supporting a high level of investment attractiveness of the United States and companies that operate in the country. That is why this particular legislation can be considered as extremely benefiting for the national economy as well as investors.

Common stockholders are the basic owners of a corporation, but few stockholders of large corporations take an active role in management. Instead, they elect the corporation’s board of directors to represent their interests. Board members seldom get involved in the day-to-day management of the company. They establish the basic mission and goals of the corporation and appoint

As details of the Enron scandal surfaced public outrage grew, calling for action, accountability and consequences. Corporate governance began receiving renewed interest. Corporate governance is a multi-faceted subject that sets forth the rules and responsibilities of the relationship between the corporation and its stakeholders (Cross & Miller, 2012). This includes the company’s officers and management team, the board of directors, and the organizations shareholders.

Corporate governance is the rules in which companies are controlled. This governance essentially balances the

Corporate governance refers to ‘the ways suppliers of finance to corporations assure themselves of getting return on their investment’ (Shleifer and Vishny, 1997: 736). Corporate governance discusses the set of systems, principles and processes by which a

Corporate governance is a set of actions used to handle the relationship between stakeholders by determining and controlling the strategic direction and performance of the organization. Corporate governance major concern is making sure that the strategic decisions are effective and that it paves the way towards strategic competitiveness. (Hitt, Ireland, Hoskisson, 2017, p. 310). In today’s corporation, the primary objective of corporate governance is to align top-level manager’s and stakeholders interest. That is why corporate governance is involved when there is a conflict of interest between with the owners, managers, and members of the board of directors (Hitt, Ireland, Hoskisson, 2017, p. 310-311).

Corporate governance explains the official rule and regulative parameters for controlling and overseeing the entity (Cascarino, 2012, pg. 131). Responsibilities following the audit committee include keeping up to date safe guards and flow of communication with the auditors (Dogas, C., 2015). Corporate governance clearly explains the “rules, processes, and laws under which entities are operated, regulated, and controlled and includes such the board of directors and the audit” (Cascarino, 2012, pg. 131). After the effects were felt of the first large fraudulent crime of Enron and WorldCom, “the United States enacted the Sarbanes-Oxley Act (SOX) with the plan to widen the duties of auditors, management, audit committees, and boards of directors” (Cascarino, 2012, pg.

While shareholders’ agreements take away the directors’ discretions across a range of important matters, investors still claim to value the right to appoint a director. They actively encourage close relationships and communication between shareholders, directors and management. In fact, the size of many boards is determined by the maximum size of the shareholding that can be attracted without director representation. This frequently results in shareholdings of 5 to 7% appointing a director and, in combination with independent chairman, can produce boards of 15 or more directors.

Corporate governance can be defined as the process, customs, laws by which the affairs of a company are managed and controlled it also

There is extensive research on board composition and the importance it places on different aspects of organisation performance. (Kang H, et al 2007).

The corporate governance can be referred to as a set of standard operation procedures or set of guidelines that control and directs how the company performs all its regulatory practice and procedures. (Brusseau, 2012) The guidelines are then reviewed and approved by the board of directors. The corporate governance standards primarily involve looking out for things like the interest of stakeholders, to include laying out the rights and responsibilities of all the stakeholders within that company. (Brusseau, 2012) The stakeholders can be anyone with interest in the business such as shareholders, governments, communities, customers, suppliers, financiers, and or managers.

The corporate governance debate has been a global phenomenon, attributed to the increasing deregulation of worldwide capital markets and the expansion of the shareholder class . Such changes have increased awareness of the importance of corporate governance practices,

Another evidence that the board has become stricter is increase in the probabilities of CEO dismissal. The board not only controls what the management does but also the process of hiring and compensating the top executives. The question that arises here is whether the board steps forward and acquires the costly signal about competency of the CEO or not? On the other hand, how does the CEO influences the board and gains control it, how well does the CEO market her capabilities in order to bargain for less independent board? The question that arises here is that if board controls the dismissal of CEO then why are directors reluctant to object to CEO’s decisions which are not in favor of the shareholders, why doesn’t the board remove the CEO when her performance is poor? Why do the board directors are happy to always act as “yes man” instead of acting as a “troublemaker” or a “strict monitor”. Mace (1986) shows that directors remain steadfastly loyal to misguided CEOs.

Q3. Q3Theory: author have not discussed any particular theory which is a drawback of this article. But discussed something which somehow related corporate governance, boar and structure of board. The primary duty of the boards of director are monitoring and advising. Author discussed about the advantages and disadvantages of having small and large board members. And also discussed the importance of having outsiders in the board. Author used three different performance measurement tools to evaluate firms performance (profitability, Tobin’s Q, ROA). Author provides evidence form different countries (such as, USA, Finland, Switzerland, Canada, Malaysia) on the relationship between board size and firm performance. Most of the evidence proved negative relationship between board size and firm performance.

Corporate Governance refers to the way a corporation is governed. It is the technique by which companies are directed and managed. It means carrying the business as per the stakeholders’ desires. It is actually conducted by the board of Directors and the concerned committees for the company’s stakeholder’s benefit. It is all about balancing individual and societal goals, as well as, economic and social goals. Corporate Governance is the interaction between various participants (shareholders, board of directors, and company’s management) in shaping corporation’s performance and the way it is proceeding towards. The relationship between the owners and the managers in an organization must be healthy and there should be no conflict between the