CONTEMPORARY CORPORATE GOVERNANCE ISSUES Essay Example | Topics and Well Written Essays - 2500 words

CONTEMPORARY corporal GOVERNANCE ISSUES - Essay ExampleIt is an institutional arrangement for various bodily participants having direct or verifying interests in corporation like shareholders, managers/directors, creditors, customers, suppliers, employees, local communities, general public and government (Figure 1). Figure 1 corporate Governance Relationships Source (Letza, Sun & Kirkbride, 2004, p.243) The importance of corporate administration in 21st century has been cozy up by series of corporate frauds like Enron, WorldCom and Tyco whose managers engaged in illegal reporting leading to neediness of shareholder wealth. As shareholders in many countries are absentee owners and managers have the control and power over the ecesiss activities, these managers can place their own interest before the interests of shareholders, on that pointfore generating the principal-agent conflict. There are authoritative views regarding the convergence of corporate governance systems howev er such possibility is least likely to happen cod to difference in corporate culture and ownership structures. In recent years many authoritative proposals have been made in UK regarding corporate governance such as Higgs 2003, Turnbull commissioning 1999, Hampel Committee 1998, Greenbury Committee 1995 etc (Letza, Sun & Kirkbride, 2004, p.242). The legislative strategies place importance to the need of a single governance structure for the corporate world. However no single model of corporate governance has worked at all times. Presently there are four main perspectives on corporate governance that are discussed in the following sections. The Principal-Agent stupefy Considering a sole-proprietorship organization where the owner-manager is considering sale of a part of his interest to outsiders. As the owner-managers share testament fall the incentive to... According to the research findings the field of corporate governance is relatively new to the surmise of organization. Al though the issues of corporate frauds, social irresponsibility and abuse of managerial power that have led to corporate governance mechanisms are not new to the corporate world. The corporate fraud case of Enron, WorldCom and Barings bank has made the investors move in the governance issues of ownership and control. However the theories which form the theoretical framework of corporate governance have not been fully developed to provide a uniform solution to address agency problems. Based on the review paper by Letza, Sun and Kirkbride on corporate governance this project has been an attempt to critically analyze the models of corporate governance which have been categorized into two perspectives- Shareholder and Stakeholder. These models have been the much debated imputable their different approach towards the governing mechanisms and the changing relationship of management and shareholders and/or stakeholders. The principal-agent model has been the theoretical can of the other t hree models however due to widely accepted flaw of equating wealth maximation with share price maximization has led economists to look beyond the shareholder wealth maximization objective. The short market model is similar to principal-agent model but is oriented more towards the internal mechanisms built on long-term relationship and corporate performance.