CORPORATE GOVERNANCE Essay

Governance: this concerns power and applying an understanding to the distribution of power to the management.

Corporate governance in itself has no single definition but common principles which it should follow. For example in 1994 the most agreed term for corporate governance was “the process of supervision and control intended to ensure that the company’s management acts in accordance with the interest of shareholders” (Parkinson, 1994)1. Corporate governance code is not a direct set of rules but a self-regulated framework which businesses choose to follow. This code has continued to change in the past 20 years in accordance with what is happening in the business world. For example the Enron scandal caused reform in corporate governance with the Higgs Report which corrected the issues which were necessary. Although it does not quickly fix problems, it gives a better framework to

Corporate governance is a commonly used phrase to describe a company’s control mechanisms to ensure management is operating according to

The ‘principles-based’ model of corporate governance is applied in Commonwealth countries. Under this model companies are required to report that they have followed the governance principles laid down in the codes or to explain why they have not. (Tricker 2012)

The need for clarification on the board requirements for a majority of independent directors as it relates to corporate governance is of great importance and would be discussed in this write up.

The exercise of authority; direction and restraint exercised over actions of men in communities, societies or states; the administration of public affairs, according to established constitution, laws and usages, or by arbitrary edicts. (gov)

Corporal governance is a strategy that has been utilized in the United Kingdom where a board is responsible for the success of the whole organization (Larcker, et al., 2011). A chief executive, separate chairperson, independent non-executive and executive direction consists the whole board. The organization is annually assessed by the board to see how its performing and accommodation are made where necessary. Transparency is the main principle that works in integrating the board members. The shareholders are given effective rights and encouraged to be engaged in the organization in that they have invested in them.

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

The government is an intermediate agency which has the main, though by no means the exclusive, responsibility for society’s adherence to the principles which favour increased autonomy and respect for people’s choices.

Corporate governance is a model in which processes and relations by which corporations are controlled and directed. It can also be defined as a system of laws and authoritative approaches by which corporations are directed and controlled. This is achieved by considering the internal and external structures of the corporations. The intentions include monitoring actions of management and directors to moderate agency risks, which may be rooted in the misdeeds of corporate officers. This ensures that these risks and conflicts are prevented and moderated using policies, laws, customs, processes, and institutions that have great impacts on the way a corporation is controlled. This corporate governance has great impacts on firm performance,

“Governance” here refers to the nature of relationships between buyers and sellers, including the extent and type of their interactions with one another.

Corporate governance is a relatively new area and its development has been affected by theories from a number of disciplines, including finance, economics, accounting, law, management, and organisational behavior. Agency theory has probably affected the development of the corporate governance framework the most. Agency theory identifies the agency relationship where one party, the principal, delegates work to another party, the agent. In the context of a corporation, the owners are the principal and the directors are the agent. In addition, there are other theories that have affected the development of corporate governance, which include: transaction costs economics, stakeholder theory, and stewardship theory. The development of corporate governance is a global occurrence and, as such, is a complex area including legal, cultural, ownership, and other structural differences. Therefore, some theories may be more appropriate and relevant to some countries than others.

The Federal Reserve Bank of Richmond defines the subject as “...the framework by which a company’s board of directors and senior management establishes and pursues objectives while providing effective separation of ownership and control. It includes the establishment and maintenance of independent validation mechanisms within the organization that ensure the reliability of the system of controls used by the board of directors to monitor compliance with the adopted strategies and risk tolerance.” But Andrew Graham sees it as the exercise of authority, direction and control of an organization for the purpose of ensuring that it’s (the organization’s) purpose is achieved. Thus, Good governance is about safeguarding the mission of the organization, establishing a values framework, ensuring that sound management and risk practices are in place, holding those under oversight to account and accounting to the broader public interest. Therefore, good corporate governance is not only about high financial performance, it is about high achievement and performance within the line of activities, purpose, vision and mission of an organization. In this sense therefore, corporate governance is not an exclusive preserve of profit-making organizations; it can be successfully applied to public sector/nonprofit organizations to achieve public governance objectives within the

However the state and governance though are different they are both necessary to the study of politics. According toHeywood (2000:41) argues that politics is often understood as the study of the state. There is need for a state and a basis of political obligation.Then individuals should obey the state because it the only safeguard they have against disorder and chaos. The government has been traditionally been the principal object of political analysis, the art of government exercise of control within society through the making and enforcement of collective decisions.

‘Good governance’ means competent management of a country’s resources and affairs in a manner that is open, transparent, accountable, equitable and responsive to people’s needs.