Corporate Governence TNB
Corporate Governence TNB
Corporate Governence TNB
0 LITERATURE REVIEW
1.1 INTRODUCTION
Corporate governance is the board term describes the rules, processes, and laws that
direct the organization and corporation in which they are operated, controlled and
regulated (H.Khan, 2011). Basically it defines the rights and responsibility of the
corporate participants to achieve the goal of the organization and manages the
relationship among the shareholders, boards of directors, officer and managers and
other stakeholders.
According to Chung et. Al, poor governance increases the information asymmetry
which implies operation efficiency and poor financial. Due to this, corporate governance
affects stock market liquidity and increases the information asymmetry between insiders
and outside owner or liquidity provider.
A governance system with high quality includes tools and mechanisms that ensure
followings: target management follows to maximize investors' wealth and prosperity;
company legislation protects rights of minority shareholders and limits controlling
shareholders; Most board members are non-binding members (Fox and Heller, 2000).
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There are two broad classes of owners. They are an individuals and institutional. By
differentiating these classes, it would help to gives better understanding of the role that
shareholders play in shaping a firms corporate governance.
1.3.1 Individual Investors
Individual Investors own relatively small quantity of shares which is not
sufficient to directly influence the corporate governance. Individual investors are
often acts as a group by voting collectively on corporate matters in order to
influences the firms.
There are four areas focuses in the principles from the report. Those are board
of directors, directors remuneration, shareholders and accountability and audit.
The code is similar to the Combined Code on Corporate Governance (United
Kingdom) and is hybrid in nature. Under the approach, the companies in Malaysia
should apply the broad principles of good corporate governance sets out by the
code flexibly and with common sense to the varying circumstances of individual
companies.