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Corporate Governance Essay

3983 words - 16 pages

Corporate Governance

" Corporate governance - ten years ago the phrase was not used, today
it is commonplace. The work of company directors is in the spotlight.
The issues are legion: How to improve corporate performance and
strategies, how to ensure corporate conformance through executive
supervision and accountability, the role of outside directors, audit
committees, chairman and CEO, directors' remuneration, German two-tier
boards, Japanese boards, institutional, investor power….. "

(Corporate Governance, Bob Tricker, 1984)

The term 'corporate governance', in recent years has been used in a
number or contexts, particularly in relation to that of boards of
companies listed on the stock exchange. But many of the issues
surrounding corporate governance have had implications for boards of
privately owned companies too. Indeed, governance is the central role
of all boards of directors, so an understanding of what it is and the
issues involved can provide a useful insight for directors.

This report will not only present the requirements of the 'Combined
Code of Practice on Corporate Governance' but also take a look at the
debate that has evolved around corporate governance within the UK over
the past years. It will discuss some of the specific initiatives that
have been undertaken to help clarify and codify some of the issues
raised, look at some of the definitions that have been used.

The corporate governance debate has flourished in the last few years,
not only in the UKbut all over the world. The ranges of issues are
substantial and varied. Company performance, individual performance,
role of directors, roles of shareholders… the number of relevant
issues appears infinite. Yet, while much of this explained in its
name, it is difficult to find a clear, universally accepted,
definition of what is meant by corporate governance. But many
countries regard a better corporate governance practices as a way to
improve economic dynamism and therefore enhance overall economic
performance.

Corporate governance issues probably came to the fore in the early
1980's in the United States during the heyday of the corporate
take-over activity. Perceiving little support from their institutional
shareholders, numerous US Company boards started to initiate
protective practices to deter any undesirable take-over bids. While
occasionally effective in their primary goal, these measures were seen
by some shareholders, especially public pension funds, as acting
against their best interests. Subsequently, these shareholders began
to take a greater interest in their investments.

Legal commitments forced upon US corporate pension funds to 'manage
their assets' hastened this process. Out of this, Corporate governance
was inevitably born.

Corporate governance is set in the...

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