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Transparency In Corporate Governance Essay

1405 words - 6 pages

Transparency in Corporate PAGE \* MERGEFORMAT 1
Running head: TRANSPARENCY IN CORPORATE GOVERNANCETransparency in Corporate GovernanceUniversity of PhoenixTransparency in Corporate GovernanceThis paper evaluates the case of McBride Financial Services, Inc (MFSI), evaluating the concept in corporate governance transparency and the relationship between self-interest of management and effective corporate governance. According to Chew and Gillan (2004, p. 73), before the 1980s, the structure of corporate governance of large corporations allowed managers to think of the corporation rather than the shareholders. The "goal was not to maximize shareholder wealth, but to ensure the growth" of the company "by balancing the claims of all important corporate stakeholders, employees, suppliers, and local communities as well as shareholders." Since 1980, corporate governance has changed dramatically with the concept of Corporate Transparency.ConceptCorporate Transparency is defined by 12manage (2010) as a term that "reflects the idea that the more information is disclosed about organizational activities in a more timely fashion to a wider public the better it is." McCarthy and Flynn, (2004, p. 29) states primary goal of Corporate Transparency "is to promote honest and efficient markets and informed investment decisions through full and fair disclosure." In financial reporting, transparency relates to the financial information about a company is made available and understandable to the market and its investors. Though too much transparency could hinder a corporation's competitive advantage, there must be some transparency for a free market to be efficient. American organizations are slowly overcoming the barriers of malfeasance and financial corruption of the past. Corporate governance has seen drastic changes from government regulations, through the demand for transparency has resulted in shifting its philosophy from the agency theory to creating shareholder value. The power that was once influenced by the chief executive officer (CEO) has been shifted to an independent board of directors. Audit Committee's now have oversight of financial information because of the new laws and regulations in which mandate it. The organizations' reputation depends upon transparency and compliance to the new regulations. When Beltway Investments invested in McBride Financial Services, there were no internal controls in place, nor were there any policies and procedures, committees to regulate corporate compliance. This paper illustrates that t to create shareholder wealth, MFSI CEO Hugh McBride must provide transparency and compliance in place of his own self-interest of management resulting in effective corporate governance, ensuring the success and integrity of his company.Relationship between self-interest of management and effective corporate governanceSelf-interest of management restricts the activity of compliance and transparency through "self's" control of the company...

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