Essay on Corporate Goverance: How to Help with Fraud

2001 Words 9 Pages
Agency theory, stakeholder theory, stewardship theory and transaction cost economics are the main theories that influence the development of corporate governance. The corporate governance can be drawn from a variety of disciplines and areas such as finance, economics, management, accounting rules, legal and regulatory, organization behaviours, etc. It express concerns in both internal aspects of the company (monitoring internal control & board structure) and the external aspects (eg. relationship of labour policies, role of multi shareholders and other stakeholders) besides protections of minority shareholder’s right (Claessens and Yurtoglu; 2012; Mallin, 2013). The Management will have the responsibility for the design, implementation and …show more content…
Quinn and Jones ( 1995) approach that as an agent, they should maintain minimum moral while applying four principles, i.e. avoid harm to others; represent autonomy of others; avoid lying and honour agreements; create trust, honesty and loyalty of principals-agents relationship.

2.1.1. Debates of Agency Theory
Relationship of principal and agent can be related to the separation of ownership and control. All agency relationships experiences agency cost, which is a cost arise from many source which include monitoring and bonding costs (Jensen and Meckling 1976), recruitments costs, oppose selection, moral hazard, self-dealing, corruption and self-regulation (Shapiro, 2005). Besides, the agency relationships also cause a number of disadvantages relating to the opportunism or self-interest of the agent. The agent may not act for the best interest of the principal; the agent may misuse his/her power for monetary or other advantages; moral hazard; principals-agents have differences interest and asymmetric information. The view and objective from principal and agent may differ, for example the agent may not take appropriate risk in pursuance of the principal’s interest, idler corporate resource, because they view those risks as in-appropriate (Heat and Norman, 2004).

Jensen and Meckling argue that the interest of principal and agent are always conflict. It will not equally maximize the benefits. The challenge is how to

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