corporate governance

Corporate governance is a very poorly defined concept; it covers so many different economic issues. It is difficult to give a first class definition in one sentence. Corporate governance has succeeded in attracting a great deal of interests of the public because of its obvious importance for the economic health of corporations and society in general. As a result, different people have come up with different definitions that basically mirror their special interest in the field. It is difficult to see that this 'disorder' will be any different in the future so the best way to define the concept is perhaps to list a few of the different definitions rather than just mentioning one definition.

"Corporate governance is a field in economics that investigates how to secure/motivate efficient management of corporations by the use of incentive mechanisms, such as contracts, organizational designs and legislation. This is often limited to the question of improving financial performance, for example, how the corporate owners can secure/motivate that the corporate managers will deliver a competitive rate of return.” www.encycogov.com, Mathiesen [2002].

According to Shleifer and Vishny in The Journal of Finance, “corporate governance deals with the ways in which suppliers of finance to corporations assure themselves of getting a return on their investment.”

J. Wolfensohn, president of the Word bank, quoted by an article in Financial Times in June of 1999 that "corporate governance is about promoting corporate fairness, transparency and accountability."

“Corporate Governance looks at the institutional and policy framework for corporations - from their very beginnings, in entrepreneurship, through their governance structures, company law, privatization, to market exit and insolvency. The integrity of corporations, financial institutions and markets is particularly central to the health of our economies and their stability.” (www.oecd.org)

What does this all mean and how does it affect the business world today is what may be asked. Criticism of corporate governance is back with a vengeance in the post-Enron era. Is the entire governance system broken down and in need of change, or was it just the wrong actions of a few people that has led to this new case of critisms? E...

... middle of paper ...

...an Administration are leading the way for reform, which is unusual “given the typical pro-business sympathies of these groups.” Some people feel that the current governance is working as best it can and that greater regulation will not prohibit the unethical and immoral actions of a few people. However, employees want greater protection. They want to be assured that the rules for selling company stock are not different for top managers that they are for employees. Investors also want to be looked after. They want to be certain that the public information available to them is “an accurate and fair representation of the company’s financial status.”

(Business Week 116)

www.encycogov.com. Mathiesen 2000

www.oecd.org. Organisation for Economic Co-operation and Development. Building Partnerships for Progress

Booker, Katrina. “Trouble in the Boardroom.” Fortune Magazine. May 13, 2002

Luoma, Patrice. “Enron and Beyond.” Corporate Self-Governance and the Corporate Checks and Balances System. CCH Incorporated. 2002

“Corporate Governance: The Road Back.” Business Week. May 6, 2002. p. 116