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    Emergence of Corporate Governance, Objectives Thereof, and Parties Thereto

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    Emergence of Corporate Governance, Objectives Thereof, and Parties Thereto

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    mahika.anand16
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    3. Emergence of Corporate Governance, Objectives Thereof, And Parties Thereto

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    3 views11 pages

    Emergence of Corporate Governance, Objectives Thereof, and Parties Thereto

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    mahika.anand16

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    © All Rights Reserved
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    of 11

    Emergence of Corporate

    Governance, Objectives thereof,


    and Parties thereto

    Dr. Sujata Bali,


    Associate Professor, School of Law,
    UPES, Dehradun
    James Wolfensohn, former
    President of the World Bank,
    predicted in 2000,
    “The proper Governance of
    companies will become
    as crucial to the world as
    the proper governing of
    the nations.”
    Conceptual Origin:
    Adam Smith (1716), Alfred Marshall (1920), and Berle and
    Means (1932).

    A.A. Berle, Jr. (1959) stated that a company is not merely a


    legal institution. It is rather a legal device for the
    attainment of any social or economic end and to a large
    extent publicly and socially responsible.

    Emphatic origin
    Financial frauds and Scams.
    Geographical Origin- USA & UK.
    USA- ‘agency theory’.
    UK- Cadbury Committee Report (1992).
    M.M. Blair (2001) points out that the phrase corporate
    governance came into prominent use in the 1980s, and
    is often used narrowly to refer to the mechanism and
    rules that govern the relationships among direct
    corporate participants in the publicly traded firms,
    especially shareholders, directors, managers, and
    sometimes employees.
    More on Cadbury committee, 1992 (UK)
    established under the chairmanship of Sir Adrain
    Cadbury by the London Stock Exchange (LSE), and
    Financial Reporting Council (FRC). This committee
    had a mandate to report on the, “financial aspects of
    corporate governance”.
    Perspectives on Corp. Gov.:
    1. Shareholder or Capital Market Control
    Perspective
    2. Organization or Management Control
    Perspective
    3. Stakeholder- Control Perspective
    Theories of Corporate Governance
    Primary
    1. Agency theory
    2. Stewardship theory
    3. Stakeholder theory
    4. Sociological theory
    Secondary
    5. Resource Dependency Theory
    6. Transaction Cost Theory
    7. Hazard Moral Theory
    8. Political Theory
    Tertiary
    9. Ethics Theory
    10. Information Asymmetry Theories
    11. Theory of Efficient markets
    Stakeholders in corporate Governance/
    Parties to Corporate Governance
    Internal or visibly
    associated Stakeholders External Stakeholders
     Creditors,
     Shareholders/Investors  Customers/Consumers
     Board of Directors  Stock Exchanges
     Management  Intermediaries
     Employees  Business Partners
     Local community
     Government
     Society/ Nation
     World Community
    Models of Corporate Governance:

    Anglo-American Model
    German Model
    Japanese Model
    Indian Model ?
    Objectives of Corporate
    Governance may include:
    Curtailment of mismanagement.
    Protecting investor interest.
    Protecting the interest of other stakeholders.
    Increasing efficiency of human resources.
    Enhancing Goodwill and Market value thereby attracting
    foreign investment.
    Ensuring capital market stability.
    Ensuring optimum utilization of corporate and national
    resources.
    Aiming for Sustainable development.
    Ensuring Rule of Law.
    Questions?

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