The Pros And Cons Of Corporate Governance

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Corporate governance has undergone tremendous growth in the last decade. Many countries have pronounced corporate governance codes with exemplifies good corporate governance. This recommendations are geared towards achieving transparency and accountability. U.S and U.K views corporate governance solely from the perspective of wealth maximization for shareholders. On the other hand Japanese companies and some other countries has gone further to give corporate governance a broader definition which includes employees, customers, suppliers and shareholders satisfaction.

Corporate governance is deliberate and sustained efforts by the firm to update, improve, systematize and adjust its internal regulations and guidelines. World over corporations have been under sustained attack for continued improvement in performance at expense of moral or social issues. Good corporate governance involves financiers and other stake holders of an entity getting value for their investment. This, therefore, can be viewed from agency perspective where the ownership and control is separate. An ideal corporate governance practice does not only involve the fight between shareholders and directors but the ethos of an entity and achieving its set goals. According to Shleifer and Vishny (1997) the core objective of corporate governance in which mostly applies to Anglo-American companies, involves design of incentives which will maximize return on equity given that the ownership and control is separate.

According to ASX Corporate Governance Council (2003) the basis of good corporate governance involves solid foundation for management and oversight, promotion of responsible and ethical decision making, integrity in financial reporting, safeguarding right...

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...erse control rights and ownership separation. The company should clarify and let the public understand the roles and responsibilities of the board of directors.

In conclusion good corporate governance aims at minimizing risks in firms through establishment of synergies among stake holders .The fundamentals of which involves proper selection of the board of directors as well as proper definition of their roles. The board of directors are the ones responsible for defining the company strategies since all companies experience uncertainties which can be minimized through keeping abreast with modern business governance issues. Apart from the risks management companies will remain competitive worldwide by adhering to fair trade practices, consumer rights, environment and pollution controls, and employment acts and proper disclosures of information to all stakeholders.

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