The Difference Between Management & Governance

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The difference between Management and Governance: Analysis in the context of Small and Medium Enterprises –SMEs. By Callixte NYILINDEKWE I. Introduction: Traditionally, corporate governance has evolved around the contract theory and agency problem based on separation of ownership and management (Dube, 2011). The benefits of this separation derive from the monitoring by the board of the CEO activity in the interest of shareholders, and generally in the interest of all stakeholders. There is a need here to first know what the agency theory is. Agency theory relative to corporate governance assumes a two-tier form of firm control: managers and owners. Agency theory holds that there will be some friction and mistrust…show more content…
Whilst executive management should have reasonable level of power to run the business, corporate governance ensures that such powers are set to practical dimensions in order to minimize misuse of authority to serve objectives not necessarily in the best interest of the shareholders. In general, corporate governance highlights two major principles: * Oversight and control over the executive management 's performance and strategic directions * Accountability of the executive management to the shareholders For that reason the principles of corporate governance apply on those who assume the ultimate responsibility for success or failure of the organization. (Abou-el-fotouh, 2009) For better understanding, it is worth here to present general principals around which businesses are expected to operate to assure proper governance (Wikipedia, 2011). * Rights and equitable treatment of shareholders: Organizations should respect the rights of shareholders and help shareholders to exercise those rights. They can help shareholders exercise their rights by openly and effectively communicating information and by encouraging shareholders to participate in general meetings. * Interests of other stakeholders: Organizations should recognize that they have legal, contractual, social, and market driven obligations to non-shareholder stakeholders, including employees, investors, creditors,
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