Good Corporate Governance Is Good For Bank's Bottom Line

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

It must, however, be acknowledged that while everyone advocates and wants corporations to maintain ‘good corporate governance’, measuring the quality of corporate governance structures of the Australian companies has been, at best, very difficult.

The article is written to help readers gain a solid understanding the roles of corporate governance, both inside and outside the company. Its goal is simply to impart information, not make claims or arguments on its own. I will be judging it mainly on the sources gathered, numerous examples and explanations given and the overall effectiveness it possesses in effectively communicating its ideas.

Corporate governance lies at the heart of the way businesses are run. Of ten defined as the ‘way businesses are directed and controlled’, it concerns the work of the board as the body which bears ultimate responsibility for the business. Governance relates to how the board is constituted and how it performs its role. It encompasses issues of board

Similar to the sporting organizations, companies listed on the ASX (Australian Securities Exchange) also involves good corporate governance to promote investor confidence, which is fundamental to the ability of them to compete for capital. In assisting listed companies with well-structured corporate governance, specific Principles and Recommendations are directed and applied. There are eight central principles that the ASX (2014) Principles and Recommendations are structured around and intended to promote (see Table 2 below). With these recommended corporate governance practices set out from the Principles and Recommendations, companies listed on ASX have greater chance in achieving good governance outcomes and meeting the reasonable expectations of most investors in most

1. This article focuses on the Gompers, Ishii, and Metrick (GIM, 2003) study which found that strong shareholder rights lead to higher stock price returns and thus value. This is a great indicator that good governance has a direct effect on the performance of the firm. The article finds that corporate governance has a positive impact on the firm / management / shareholders. However good governance is not always the correct metric of evaluation for firms and boards. The primary finding of the article is from an economic analysis defending the relation between corporate governance and performance. This article examines the relationships among corporate governance / corporate performance / capital structure / and corporate ownership structure. Many of the past studies have taken into consideration only one measure of governance, while this study focused on seven different governance measures. The article also looks at the performance of a firm and the relationship it has with management turnover or disciplinary actions required.

The bankers’ remuneration problem becomes a ‘populist’ issues especially during the financial crisis in 2007. It is said that one of the factors that contribute to the financial crisis and this is not the first time this point has been raised. General concern about the relationship between certain low corporate performance and high remuneration to executives in banks means there exists an imbalance between them (Andrew Clark, Tim Edmonds, 2015). With the Government investing public money in certain famous Banking Group, this problem has upgraded from a private sector concern to a significant political one (BBC News, 2008). However, this cannot blame on single body or organization. A lot of researchers have explored the problem of remuneration systems and how to improve the remuneration structure in the banks. This essay mainly uses agency theory, stakeholder theory, institutional theory, Transaction cost theory and other related theories to explain how the remuneration packages influence the bankers in short-term and long-term. Meanwhile, it also shows some problems of remuneration system in corporates especially in banks by analysing the recent literature. Finally, the essay gives certain relating recommendations to solve these problems according to a few policies such as UK corporate combined governance codes in 2003 and 2014 etc.

The main purpose of this paper is to analyze the principal players and influencers within corporations that monitor, and control the financial and operational activities that shape corporate governance outcomes. The role that boards of directors, auditors, rating agencies, security analysts, accountants, and creditors play within corporate operational activities will be the central component of our analysis. Particular focus will be placed on the duty of the board of directors to act in the company’s “best interest” as well as the execution of quality auditing, that auditors are charged to produce. We’ll examine the positive attributes and potential risks that these principal agents present as I provide my assessment of three

The rise and fall of the Royal Bank of Scotland is characterized by poor corporate governance which allowed for the complete dominance of the executive management over the board of directors and a massive principal-agent problem. Positive social dynamics and the power of weak ties allowed for compliance while intimidation and bullying tactics silenced questions, concerns and opposition. The board’s utter compliancy and borderline negligence enabled rampant, unchecked empire-building at the cost of shareholder value and led to a spiral of unaccountability and gross incompetence. Stakeholders’ loss of confidence from misinformation and misdirection was an inevitability that sealed

Because of the clear, governance and management efficiency, the legal person shareholders of commercial banks tend to play a greater influence on the governance structure of the commercial banks than in the state shareholders and the dispersed public shareholders. The proportion of legal person shares is relatively concentrated, they have the ability to supervise the management of commercial banks in the management of the behavior, so that it is more in line with the interests of shareholders. The proportion of legal person shares is large, because the legal person shares cannot flow, can only transfer agreement, with strong stability, and therefore they are more concerned about the long-term development of commercial banks, they have stronger motivation to supervise and control the commercial bank management. Therefore, to increase the proportion of corporate shares, improve the modern enterprise system of commercial banks, play its role in the supervision of bank governance, so that the corporate shareholders in the management of commercial banks play a more important role is to improve the performance of commercial banks is an inevitable choice.

Using the stakeholders’ theory suggested by Evan and Freeman (1993) cited in Crane and Matten (2010: 61-62). The two simple principles of corporate rights and corporate effects were not adhered to. The bank action violates the rights of the shareholders to information by hidden the truth about the underlying weakness in their financial position. The fiduciary relationship of bankers with the shareholders can also be said to have been violated thereby causing negative consequences of loss of investment, diminishing long term share price and state ownership of banks for example the Royal Bank of Scotland takeover.

It is well established that good corporate governance practice is beneficial for firms, its stakeholders and whole economy. Further based on studies such as by Levine (2004), saving rates, investment decisions, technological progress and consequently economic growth are encouraged as financial systems reduce market frictions. So developing countries require reforms to stimulate financial system for revival of economy.

Corporate governance is a key element in improving the economic efficiency of a bank. It should be fair and transparent to its customers and stakeholders in all its transactions. A sound corporate governance also contributes to the protection of depositors of the bank. It also involves the manner in which the business and affairs of banks are governed by their board of directors and senior management, which reflects how they function. This paper is descriptive in nature conferred about the composition of the board of directors in the Public sector commercial banks. The finding of this paper exemplify that the Public sector commercial banks have ‘Fit and Proper’ board in their respective banks.

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