A Summary On Corporate Governance

1613 Words 6 Pages
1. Introduction
In this report I will be producing literature on Corporate Governance, with particular reference to a public company. The literature review that has been assembled is an appendix to this report.
2. Methodology
In this assignment I have used different resource to gather my information for my main body. The methods I used to conduct my research was firstly going to the city library in Wolverhampton, I researched through numerous of journals and books about Corporate Governance which were very useful to my understanding. I also used online resources to look for more relevant information towards my topic this was also very useful to conduct my research. However, I did a lot of research on the wolf website which in my prospective
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This is known as the Principal-Agent problem or the Agency problem. Petrovic and Cerovic (2010) suggest that this problem arises when the owner, or shareholder, of a company is not the same person as its manager. This is because they have differing objectives for the company; shareholders want to maximise profits whilst managers do not benefit from large profits as their salaries only increase ever so slightly, so would be less concerned about the magnitude of the profit of a company. Baumol (1963) discovered that managerial salaries were more closely related to sales revenue than profits. So, managers would aim to maximise their sales revenue in order for them to have a larger …show more content…
The role that Corporate Governance serves is to facilitate effective, entrepreneurial and prudent management that can deliver the long term success of the company (ICAEW). The UK Corporate Governance Code applies to all public, or listed, companies, which must supply information in their annual report and accounts on whether they have conformed to the Code’s guidelines. If a company does not obey the Code’s guidelines, then they must provide a valid explanation for non-compliance, this is known as ‘comply or explain.’ The code sets out good practice covering issues such as board composition and effectiveness, the role of board committees, risk management, remuneration and relations with shareholders (Financial Reporting Council).
The UK Corporate Governance Code was introduced due to the fact that managers often lose sight of the wellbeing of shareholders. This is known as the Principal-Agent problem or the Agency problem. Petrovic and Cerovic (2010) suggest that this problem arises when the owner, or shareholder, of a company is not the same person as its manager. This is because they have differing objectives for the company; shareholders want to maximise profits whilst managers do not benefit from large profits as their salaries only increase ever so slightly, so would be less concerned about the magnitude of the profit of a

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