Corporate Governance Research Paper

1171 words - 5 pages

MANAGING PEOPLEManaging people is about effectively co-ordinating, directing and guiding people towards the achievement of organisational goal.By people we mean board members, managers, workers, shareholders and other stakeholders (public).CORPORATE GOVERNANCECorporate Governance has become a typical issue at the moment and is attracting a good deal of public interest because, of its apparent importance for the economic health of corporations and society in general. This scrutiny was provoked by the Enron, World Com and Tyco scandals.Corporate governance is difficult to define because it potentially covers a large number of economic phenomena and disciplines. With each having different views of corporate governance.SOME COMMON DEFINITIONS ARE:1. "Corporate Governance is a field in economics that investigates how to secure /motivate efficient management of corporation by the use of incentive mechanisms such as, contracts, organisational designs and legislation. This is often limited to the question of improving financial performance. For example, how the corporate owners can secure /motivate that the corporate managers will deliver a competitive rate of return." (Mathiesen 2002)2. "Corporate Governance which can be defined narrowly as the relationship of a company to its shareholders or more broadly as its relationship to society ..." (Financial Times 1997)3. "Corporate Governance describes all the influences affecting the institutional processes, including those for appointing controllers and/or regulators involved in organising the production and sale of goods and services." (Turnbull 1997)Corporate Governance is related to publicly traded, privately held, for profit and not for profit organisations.It should outline the duties, responsibilities and powers of Directors. Directors' interest should be to the stockholders, as well as, stakeholders such as employees, customers, suppliers, creditors and the community. Most times only stockholders interest are managed.THEORIES RELEVANT TO CORPORATE GOVERNANCESimple Finance Model"In the finance view, the central problem in corporate governance is to construct rules and incentives to effectively align behaviour of managers (agent), with the desires of principals (owners)." (Hanley & Williams 1996) The firm and its owners establish the rules and incentives.This can lead to problems when agents and owners have different interests. The agent may be Profit Satisfying that is, "where decision makers in the firm aim for a target level of profit other than the absolute maximum level." (Sloman 2001)To solve this problem all parties must have the same organisational goals. Goals should determine the nature of its inputs and outputs, processes to achieve outputs and interaction with its external environment.The Stewardship ModelIn this model, "managers are good stewards of the corporations and diligently work to attain high levels of corporate profits and shareholders returns." (Donaldson and Davis 1994)They...

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