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Business Ethics and corporate governance

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CHAPTER 4 RIGHTS AND PRIVILEGES OF SHAREHOLDERS OBJECTIVES The chief purpose and objective of corporate governance is the continued creation and maintenance of long-term shareholder value. While stressing the rights of shareholders as the legitimate owners of a corporation - as reinforced by the recommendations of various committees - this chapter outlines the processes and mechanism of investor protection. Chapter Outline      Introduction Rights of Shareholders Views of Various Committees on the Issue Poor Track Record of Shareholder Protection Grievance Redressal Process Introduction Corporate governance is needed to create a corporate culture of consciousness, transparency and openness. It refers to a combination of laws, rules, regulations, procedures and voluntary practices to enable companies maximise shareholders’ long-term value. Theoretical Basis - Agency Costs The most fundamental theoretical basis of corporate governance is agency costs. Shareholders are the owners of joint-stock, limited liability company, and are its principals. By virtue of their ownership, the principals define the objectives of the company. The management, directly or indirectly selected by shareholders to pursue such objectives, are the agents. While the principals might assume that the agents will invariably do their bidding, it is often not so. Two broad instruments that reduce agency costs and hence, improve corporate governance, are  Financial and non-fina ...
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