Corporate and Good Governance

Corporate governance refers to the way to exercise power over corporate entities to
achieve the goal
of collective betterment of all stakeholders.its aims to balance the interest of
different stakeholders as such senior management executives,customers, suppliers,
financiers, the government,society and so on. It combines rules,structure,system and
different interest group of people or stake holders.

The term corporate governance came in to use only in 1980s but the idea of
governance at the level of government was ancient. Research into corporate
governance started to develop in the late 1980s
The theoretical exploration of the term is relatively new even though the practice of
corporate governance has a long history. By the early years of 20th century,
companies having limited liability tended to expand into large and complex
companies with number of share holders in different geographical area, in united
state,united kingdom and other economically advanced countries so that need of
corporate governance has been realized.
Corporate governance deals with whose interest does it represents? Who is
responsible for its implementation and who it has the most impact on.
Formation of an effective corporate hierarchy is one of the most important
components of a good corporate governance.for this, the share holders, board
members,executives must be organized and they established their relationship in
accordance to the principle of corporate governance
Theories of corporate governance.
The board, executive and share holders must have proper communication on
company events and decision making. Shareholders should have access to
communicate their complain as well as suggestion on relevant issues. Moreover, the
board of directors and executive must create demarcation to perform appropriate
role separately.for this,independent members from outside the executive are to be
included in the board. By this, governing function of board are not interfered by the
executive.
Similarly, connection between board and executive should not be much attached
that the executive becomes unable to administrate the company properly .(sanjay
anand.
Theories of corporate governance

Agency Theory:
Primary assumption Managers will work towards their own
interest unless suitable policing method
are employed
Application Tactic to counter agency problems

Connotative meaning of the corporate Implies notions of monitoring and

governance control
Stewardship Theory

Primary assumption Managers will work in the bestinterest

of organization or owner and thus ,
require structures to facilitate and
empower
Application Tactic to benefit organizational
performance
Connotative meaning of the corporate Implies notions of “power and authority
governance metaphors”

Managerial hegemony Theory

Primary assumption Boards of directors play a subservient
role to the professional manager
Application Professional arrangements representing
validation procedures
Connotative meaning of the corporate Implies notions of critical phrases such as
governance fictional role of directors and failure to
get involved

Resource dependency Theory

Primary assumption Boards of directors are a liking
mechanism between organization and
the business environment in which it
operates professional arrangement
Application Representing a linking system between
the board and external bodies
Connotative meaning of the corporate Implies notions of critical metaphors
governance such as the old boy and the old school tie
brigade

Stake Holder Theory

Primary assumption Boards of directors will work towards
achieving corporate goals by balancing
the interest of( sometime conflicting)
stakeholders group
Application Professional arrangement representing a
 nexus of contracts or relationships
Connotative meaning of the corporate Implies notions of a synchronising forum
governance

Multi governance Theory

Principles of corporate governance

These are the major principles of corporate governance:
Independence: for good corporate governance, board member should be sufficiently
independent according to separation of their role. If the board members are
influenced by the executives, they can not be able to justice their role as well as
shareholders.
Accountability: although the owners in corporate business have limited liability in
corporate business, all stakeholders should have accountability for their action or
negligence.
Responsibility: in corporate organization, all stakeholders should be responsible for
their duties and obligations.
Reputation: corporate governance should concentrate for not only to the prosperity
of the organization but also to maintain good relation with public.

Models of corporate governance

Traditional model: It is a common model of corporate governance. In this model,
board of directors governs the activities of executive. For the completion of different
specific task, board is divided in to different small committees.
Carver model: this model is almost similar to the classical model but board of
directors in this model are not divided different committees.
Collective model: in this model, all parties;board,management as well as staff are
collectively involved in decision making as well as service delivery.
Operational model: In this model board of directors govern as well as run the
activities of the organization and staff are volunteers.such models are usually found
in non profit organizations.
Management model: in this model organization is run by board of directors and staff
are paid.
The Five Good Governance Principles The UNDP Principles and related UNDP text
on which they are based
1. Legitimacy and Voice
Participation – all men and women should have a voice in decision-making, either
directly or through legitimate intermediate institutions that represent their
intention.
Such broad participation is built on freedom of association and speech, as well as
capacities to participate constructively.
Consensus orientation – good governance mediates differing interests to reach a
broad
consensus on what is in the best interest of the group and, where possible, on
policies
and procedures.
2. Direction
Strategic vision – leaders and the public have a broad and long-term perspective on
good governance and human development, along with a sense of what is needed for
such development. There is also an understanding of the historical, cultural and
social
complexities in which that perspective is grounded.
3. Performance
Responsiveness – institutions and processes try to serve all stakeholders.
Effectiveness and efficiency – processes and institutions produce results that meet
needs while making the best use of resources.
4. Accountability
Accountability – decision-makers in government, the private sector and civil society
organizations are accountable to the public, as well as to institutional stakeholders.
This
accountability differs depending on the organizations and whether the decision is
internal or external.
Transparency – transparency is built on the free flow of information. Processes,
institutions and information are directly accessible to those concerned with them,
and
enough information is provided to understand and monitor them.
5. Fairness
Equity – all men and women have opportunities to improve or maintain their well
being.
Rule of Law – legal frameworks should be fair and enforced impartially, particularly
the laws on human rights.
The main areas of theG20/ OECD Principles
OECD ( organization for economic cooperation and development) is a group of 38
member country,in which most of the countries are from Europe.

I. Ensuring the basis for an effective corporate governance framework The corporate
governance framework should promote transparent and efficient markets, be
consistent with the rule of law and clearly articulate the division of responsibilities
among different supervisory, regulatory and enforcement authorities.
II. The rights of shareholders and key ownership functions The corporate
governance framework should protect and facilitate the exercise of shareholders’
rights.
III. The equitable treatment of shareholders The corporate governance framework
should ensure the equitable treatment of all shareholders, including minority and
foreign shareholders. All shareholders should have the opportunity to obtain
effective redress for violation of their rights.
IV. The role of stakeholders in corporate governance The corporate governance
framework should recognize the rights of stakeholders established by law or through
mutual agreements and encourage active cooperation between corporations and
stakeholders in creating wealth, jobs, and the sustainability of financially sound
enterprises.
V. Disclosure and transparency The corporate governance framework should ensure
that timely and accurate disclosure is made on all material matters regarding the
corporation, including the financial situation, performance, ownership, and
governance of the company.
VI. The responsibilities of the board The corporate governance framework should
ensure the strategic guidance of the company, the effective monitoring of
management by the board, and the board’s accountability to the company and the
shareholders.

conclusion
Despite the difficulties to give exact definition of corporate and good governance,
principles and actors of the corporate governance are clear about the action .
corporate governance guides the stakeholders of the organization to maintain a
certain relationship among them. It also directs to draw a kind of demarcation to
promote the separate identity and independent functioning of the stakeholders;
shareholders, executives and board. It aims to achieve collective benefits of share
holders, board,executives ,staffs of organization as well as society too.

References

Anand, S. (2007). Essentials of corporate governance. John Wiley & Sons.

Tricker, B. (2019). Corporate governance: Principles, policies, and practices. Oxford University Press,
USA.
Tricker, B. (2019). Corporate governance: Principles, policies, and practices. Oxford University Press,
USA.
Graham, J., Plumptre, T. W., & Amos, B. (2003). Principles for good governance in the 21st century.
OECD (2015), G20/OECD Principles of Corporate Governance, OECD Publishing, Paris.
http://dx.doi.org/10.1787/9789264236882-en