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principle of corporate_governance

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Corporate governance
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Corporate governance is the set of processes, customs, policies, laws, and institutions
affecting the way a corporation is directed, administered or controlled. Corporate
governance also includes the relationships among the many stakeholders involved and the
goals for which the corporation is governed. The principal stakeholders are the
shareholders, management, and the board of directors. Other stakeholders include
labor(employees), customers, creditors (e.g., banks, bond holders), suppliers, regulators,
and the community at large.
Corporate governance is a multi-faceted subject.
[1]
An important theme of corporate
governance is to ensure the accountability of certain individuals in an organization
through mechanisms that try to reduce or eliminate the principal-agent problem. A related
but separate thread of discussions focuses on the impact of a corporate governance
system in economic efficiency, with a strong emphasis shareholders' welfare. There are
yet other aspects to the corporate governance subject, such as the stakeholder view and
the corporate governance models around the world (see section 9 below).
There has been renewed interest in the corporate governance practices of modern
corporations since 2001, particularly due to the high-profile collapses of a number of
large U.S. firms such as Enron Corporation and Worldcom. In 2002, the U.S. federal
government passed the Sarbanes-Oxley Act, intending to restore public confidence in
corporate governance.
In the 19th century, state corporation laws enhanced the rights of corporate boards to
govern without unanimous consent of shareholders in exchange for statutory benefits like
appraisal rights, to make corporate governance more efficient. Since that time, and
because most large publicly traded corporations in the US are incorporated under
corporate administration friendly Delaware law, and because the US's wealth has been
increasingly securitized into various corporate entities and institutions, the rights of
individual owners and shareholders have become increasingly derivative and dissipated.
The concerns of shareholders over administration pay and stock losses periodically has
led to more frequent calls for corporate governance reforms.
In the 20th century in the immediate aftermath of the Wall Street Crash of 1929 legal
scholars such as Adolf Augustus Berle, Edwin Dodd, and Gardiner C. Means pondered
on the changing role of the modern corporation in society. Berle and Means' monograph

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"The Modern Corporation and Private Property" (1932, Macmillan) continues to have a
profound influence on the conception of corporate governance in scholarly debates today.
From the Chicago school of economics, Ronald Coase's "The Nature of the Firm" (1937)
introduced the notion of transaction costs into the understanding of why firms are
founded and how they continue to behave. Fifty years later, Eugene Fama and Michael
Jensen's "The Separation of Ownership and Control" (1983, Journal of Law and
Economics) firmly established agency theory as a way of understanding corporate
governance: the firm is seen as a series of contracts. Agency theory's dominance was
highlighted in a 1989 article by Kathleen Eisenhardt (Academy of Management Review).
US expansion after World War II through the emergence of multinational corporations
saw the establishment of the managerial class. Accordingly, the following Harvard
Business School management professors published influential monographs studying their
prominence: Myles Mace (entrepreneurship), Alfred D. Chandler, Jr. (business history),
Jay Lorsch (organizational behavior) and Elizabeth MacIver (organizational behavior).
According to Lorsch and MacIver "many large corporations have dominant control over
business affairs without sufficient accountability or monitoring by their board of
directors."
Since the late 1970’s, corporate governance has been the subject of significant debate in
the U.S. and around the globe. Bold, broad efforts to reform corporate governance have
been driven, in part, by the needs and desires of shareowners to exercise their rights of
corporate ownership and to increase the value of their shares and, therefore, wealth. Over
the past three decades, corporate directors’ duties have expanded greatly beyond their
traditional legal responsibility of duty of loyalty to the corporation and its shareowners.
[3]
In the first half of the 1990s, the issue of corporate governance in the U.S. received
considerable press attention due to the wave of CEO dismissals (e.g.: IBM, Kodak,
Honeywell) by their boards. The California Public Employees' Retirement System
(CalPERS) led a wave of institutional shareholder activism (something only very rarely
seen before), as a way of ensuring that corporate value would not be destroyed by the
now traditionally cozy relationships between the CEO and the board of directors (e.g., by
the unrestrained issuance of stock options, not infrequently back dated).
In 1997, the East Asian Financial Crisis saw the economies of Thailand, Indonesia, South
Korea, Malaysia and The Philippines severely affected by the exit of foreign capital after
property assets collapsed. The lack of corporate governance mechanisms in these
countries highlighted the weaknesses of the institutions in their economies.
In the early 2000s, the massive bankruptcies (and criminal malfeasance) of Enron and
Worldcom, as well as lesser corporate debacles, such as Adelphia Communications,
AOL, Arthur Andersen, Global Crossing, Tyco, and, more recently, Fannie Mae and
Freddie Mac, led to increased shareholder and governmental interest in corporate
governance. This is reflected in the passage of the Sarbanes-Oxley Act of 2002.[3]

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Corporate governance From Wikipedia, the free encyclopedia Jump to: navigation, search Corporate governance is the set of processes, customs, policies, laws, and institutions affecting the way a corporation is directed, administered or controlled. Corporate governance also includes the relationships among the many stakeholders involved and the goals for which the corporation is governed. The principal stakeholders are the shareholders, management, and the board of directors. Other stakeholders include labor(employees), customers, creditors (e.g., banks, bond holders), suppliers, regulators, and the community at large. Corporate governance is a multi-faceted subject.[1] An important theme of corporate governance is to ensure the accountability of certain individuals in an organization through mechanisms that try to reduce or eliminate the principal-agent problem. A related but separate thread of discussions focuses on the impact of a corporate governance system in economic efficiency, with a strong emphasis shareholders' welfare. There are yet other aspects to the corporate governance subject, such as the stakeholder view and the corporate governance models around the world (see section 9 below). There has been renewed interest in the corporate governance practices of modern corporations since 2001, particularly due to the high-profile collapses of a number of large U.S. firms such as Enron Corporation and Worldcom. In 2002, the U.S. federal government passed the Sarbanes-O ...
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