Essay about Corporate Governance

3484 Words Feb 14th, 2012 14 Pages
TABLE OF CONTENTS

1.0 INTRODUCTION ........1
2.0 WHAT IS CORPORATE GOVERNANCE 2
3.0 CORPORATE GOVERNANCE THEORIES…………………….……………..........3 3.1 Fundamental corporate governance theories……………………..……………….3

3.1.1. Agency Theory………………………………………………………………3

3.1.2. Stewardship Theory…………………………………………………………4

3.1.3. Stakeholder Theory………………………………………………………….4

3.1.4. Transaction Cost Theory…………………………………………………….4

3.1.5. Political Theory……………………………………………………….……..5

4.0 NEED FOR CORPORATE GOVERNANCE………….……………………………..5

5.0 PILLARS OF GOOD CORPORATE GOVERNANCE…….......……………………7

5.1 Leadership…………………………………………………………………...…….7

5.2 Appointments to the
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Governance is concerned with the processes, systems, practices and procedures the formal and informal rules that govern institutions, the manner in which these rules and regulations are applied and followed, the relationships that these rules and regulations determine or create, and the nature of those relationships.

The concept of corporate governance has precipitated renewed interest over the last decade due to cases of the collapse of powerful corporations. Corporations believed to have been built on sound business practices and policies collapsed illustrating their vulnerabilities if rules, regulations and sound business principles are ignored. Poor corporate governance has not only been linked to corporate scandals and failure, but also to failed states and global economic downturn.

2.0 WHAT IS CORPORATE GOVERNANCE

"Corporate governance is the system by which companies are directed and controlled."
Report of the Committee on the Financial Aspects of Corporate Governance (The UK Cadbury Code), London, 1992.

The Capital Market authority defines “Corporate governance, as the process and structure used to direct and manage business affairs of the company towards enhancing prosperity and corporate accounting with the ultimate objective of realizing shareholders long-term value while taking into account the

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