The Coming Revolution And Corporate Governance

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 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

Numerous reports on corporate governance have emphasised the desirability of increasing the number of outside directors on boards. An equally important and related issue is a growing insistence that the role of chairman and chief executive should be separate, though on this issue there is less unanimity in the U.S. than in other countries.

A decade ago, the term 'corporate governance' was barely heard. Today, it's like climate change and private equity, corporate governance is a staple of everyday business language and capital markets are better for it (ASX 2010). Therefore, corporate governance can be defined as a term that refers broadly to the rules, processes, or laws by which businesses are managed, regulated, and controlled. The term can refer to internal factors defined by the officers, stockholders or constitution of a corporation, as well as to external forces such as consumer groups, clients, and government regulations (Farrar, 2009).

The ASX Corporate Governance Council defines corporate governance as “the framework of rules, relationships, systems and processes within and by which authority is exercised and controlled in corporations” (ASX 2007 p3). The latest ASX Corporate Governance Council report (ASX 2007) articulates eight core principles, which the report states are of equal importance. Although primarily targeted at listed companies, the ASX principles are being taken into account by other types of organisations

Corporate governance is a system that ensures companies are directed and controlled (Roberts 2016a). Boards of directors are essential for companies, because they have the obligation to governance the whole company and draw up long-term scheme to make it success (Roberts 2016a).

Definitions of corporate governance are many. According to Organization for Economic Co-operation and Development (OECD), “Procedures and processes according to which an organization is directed and controlled. The corporate governance structure specifies the distribution of rights and responsibilities among the different participants in the organization – such as the board, managers, shareholders and other stakeholders – and lays down the rules and procedures for decision-making.”(Reference)

Corporate governance is the control of the strategic direction of an organization by the board of directors through exercising their power and influence as the stakeholders. It may also be explained as policies, processes, customs and laws that are utilized to direct, control and administer an organization (Feld & Ramsinghani, 2013). In an organization, pursuing the set goals should be done according to a set of policies and processes that are as fundamental as the federal laws that govern the running of any business or organization. These formal duties and processes are upheld by the board of directors and include the duty of loyalty and duty of care as well as formation of committees which may include the audit committee, nominating

Corporate Governance is the relationship between the shareholders, directors, and management of a company, as defined by the corporate character, bylaws, formal policies and rule laws. The corporate governance system was designed to help oversee the decisions and best interest of the shareholders. The system should works accordingly: The shareholders elect directors, who in turn hire management to make the daily executive decisions on the owner 's behalf. The company 's board of director 's position is to oversee management and ensure that the shareholders interest is being served. Corporate governance focus is with promoting enterprise, to improve efficiency, and to address disputes of interest which can force

A troubled economy filled by financial crises and scandals has expanded the concept of corporate governance. The Institute of Financial Auditors said that the Corporate Governance is constituted of processes and structures implemented by the board of directors to inform, direct, manage and monitor the operations of an organization towards reaching its goals. Internal audit tells us that an organization reach its objective by bringing a disciplined, systematic approach to improve and evaluate the effectiveness of risk management, internal controls and governance process.

     Governance reform has been a hot topic of discussion since the 1980s, when firms in America faced increased globalization and change, and boards were scrutinized for being puppets of the chief executives. Supporters of reform called for larger independence of directors from the CEO so that the board could make the difficult decisions needed to monitor top management and protect shareholder interests. Before the 1980s, most boards were composed largely of directors who were currently employed by the company of had just retired from the company. Critics proclaimed that directors who “were selected by, reported to, and received paychecks from the CEO could hardly be the most objective management monitors.” As a result of these complaints, many boards made changes so that most large company boards are composed of a majority of directors that “are not currently employed by, or retired from, the companies on whose boards the serve.”

The general idea we have in mind when we hear the term "Corporate Governance", is that it is an almost unattainable goal. The reason is the only companies that have "corporate governance" are big businesses with exorbitant capital, or, at least have shares on the stock-market. It is based on the idea that applying good organizational governance practices, is exclusive and expensive. But those who argue this idea are very far from reality. I must confess that I was one of these people. Currently all companies regardless of their capital or size, implement some system of administration (Knell 2008, p. 5), i.e. they have a "Corporate Governance".

Corporate governance is a key term to understand and it is increasingly important part of running a successful company. The system has evolved over the years, guided by the challenges and misjudgements of the corporate world.

The traditional approach to corporate governance has typically ignored the unique influence that firm owners exert on the board, and by extension, the top management, to behave or make decisions in a particular way. Consequently, studies on corporate governance (Cubbin and Leech, 1982; Monks, 1998; Jensen, 2000; Shleifer, 2001; Frentrop, 2003; Donaldson, 2005; Huse, 2005) have not comprehensively identified and dealt with the complexities that are inherent in corporate governance processes. Perhaps, this is where the greatest problem of corporate governance lies.

Bhagat and Bolton (2008) examined the relationship between corporate governance and performance, and found that better corporate governance, board members’ stock ownership, and CEO-Chair separation are positively related to operating performance. They also found that the probability of management turnover is positively related to board members’ stock ownership and board independence when firms perform poorly.