Exam for Chapter 1 Essay

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 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

D) Can a shareholder bring a personal action, and against whom – the company or the director- based on the facts of the question? Do you think there are grounds for a shareholder to bring derivative action? What remedies can be obtained both for personal and derivative action? (6+6+3=15 marks)

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 based largely on trust – the trust, by the stakeholders, that revenues will be fairly shared, and that those directly involved in running the company are running it in an aboveboard, honest, and open manner, and that they represent the best

According to the Organization for Economic Cooperation and Development (OECD), corporate stakeholders have a very important role, not only within the business for the community as well. "Good corporate governance helps...to ensure that corporations take into account the interests of a wide range of constituencies, as well as the communities within which they operate, and that their boards are accountable to the company and the shareholders. This, in turn, helps to assure that corporations operate for the benefit of society as a whole" (1999).

In light of recent global business scandals, corporate governance has become a significant topic. It can be understood as a dichotomy between the shareholders and the management of a company. Navigating this relationship is often problematic as the shareholders provide oversight while management makes daily executive decisions on their behalf. When managed appropriately, this balance between shareholders and management can result in improved efficiency, conflict resolution and a contribution to improving the standards and efficiency of the entire operation. This paper will examine the nature of both roles, how they often are in conflict and discuss the corporate ethics of this relationship. For a student of business organization, understanding how varying elements of a company resolve their issues is critical and can serve as a lesson that can be applied in other endeavors.

‘It is well known that the role of non-executive directors in corporate governance has been subject of debate in

Corporate governance is the set of rules and processes used by the top management to direct and control the business. It is important to have corporate governance because it provides a framework and control measures of the triple bottom line of the business and provides the interest of all stakeholders such as the shareholders, employees, customers and management.

Arthur Levitt, a former SEC chairman, defined corporate governance as “the link between a company’s management, directors, and its financial reporting system” (as cited in Hermanson & Rittenberg, 2003). The core of good corporate governance is guaranteeing open and reliable relations between an organization and its shareholders. Good governance is thus a culture of dependability, transparency, accountability, and fairness that is deployed throughout the organization. It is important for economic development, for both the individual organization, and the economy as a whole. Thus, the quality of corporate governance needs to be continuously assessed and improved, and it should be consistently promoted within organizations. However, corporate governance can only be upheld and improved within organizations if it is measured continuously (Argüden, 2010). This is where auditors, audit committees and the board of directors come in. This paper will mostly focus on how auditors can assess corporate governance in an organization.

Corporate Governance is the system of rules, practices and processes in which a company is controlled and directed. “It essentially involves balancing the interests of the many stakeholders in the company.” (Investopedia). These can include shareholders, management, customers, suppliers, financiers, government and the community depending on the type of company. It provides the framework for attaining any company’s objectives. As western culture transitions into a more globalized economy, a set of standards enhancing corporate character should be evaluated. These standards are created within an organization to add long term value for the shareholders, and should be managed on a regular basis to achieve desired goals that

1. Stockholders and owners of the company - should maintain a good long-term relationship among them.

Corporate governance is the relationship between many individuals participating in trying to determine the direction and the performance of organizations. Some of the functions of the corporate governance are managing subsidiaries, lobbying, disclosures, corporate policies and procedures. The corporate governance is also responsible for working with investors on a range of governance issues to facilitate and open dialogue between the company and its shareholders. Corporate governance also provides legal support to aviation and assures that corporate aircraft usage and reporting for tax requirement and SEC comply with applicable laws and regulations. The complete model of corporate governance includes Industry-based considerations, Resource-based considerations and Institution-based considerations.

In corporate governance theory, there are mainly two kinds of arguments. The first one is that a firm should focus on the shareholder wealth maximisation, which is called theory of shareholder. This one might be considered as the traditional approach. The other one is that a company should focus on not only the interest of shareholders, but also employees, suppliers, government and local communities, which is called theory of stakeholder.

Corporate governance is the set of guidelines that determine how a company is run. These guidelines are created by management and approved/monitored by the board of directors. It’s important for a company’s corporate governance to align with the direction the stakeholders want the company to go in.