Accounting - Theory

Developing Concepts of Corporate Governance

[Name of Student]

Developing Concepts of Corporate Governance

Introduction

Corporate governanceis the most important and significant term in the business and financial terms. The concept gains significant importance after the financial turmoil of most recognized and awarded Oil company “Enron” and “WorldCom”, these scams not only make the investors cry but also they have loosen millions of dollars therefore, the need of rules regarding implementing a transparent and clear system of governance is required.In this manner it has been done by this phenomenon because implementation of the corporate governance can be estimated on the basis on its rapid acceptance and steady growth within the capital markets and in private companies because a well-planned strategic action which executed via governance codes(Parker, 2002, pp. 121 - 129).

According to Mr. Rohan Panday,

business communities sit together in order to develop a system which enhances the confidence of its clients. The main aim is to design such rules which safeguard the interest and stakes of potential as well as local investors. The major contributors of CG corporate governance includes shareholders, directors and the Company Management of the firm and other participants are suppliers, customers, creditors, partners and employees of the firm but the purpose of the corporate governance is not more than to controlled.

Background

One of the schools of thought is on the view that corporate governance is a process by which direction is given to an organization, the organization is controlled and it is also held to account. This entails that corporate governance covers the accountability, leadership, authority, direction, stewardship and control exercised in the procedure of an organization's management. This definition seems more balanced because it distinguishes the requirement for checks and balances which are employed in the process of organizational management; therefore it can be taken as a more comprehensive definition of corporate governance (Burki & Ahmed, 2008, pp. 79).

Mostly the auditors are the main instruments who play the fundamental role in implementing the norms of corporate governance, auditing in broader sense plays an important role in defending the role of company investors.There are a variety of factors which contributes to the company growth and strengthening relations with investors as a whole. Although the Code is focused primarily on the listed companies of stock market but after wards it becomes a models to be followed by all the companies in order to develop trust and build long term relationships with the stakeholders of the company(Lee, 2002, pp. 52 - 67).

Therefore a model for Corporate Governance needs to be developed so that the companies can strictly follow it,

Assumptions for the CG Mechanism

More active and more responsibility from the owner

Creation of a balance between owners, the board and senior management

Clarify roles and responsibilities between the various management and supervisory bodies Caring for the practical application of the Companies Act principle of equality

The creation of the greatest possible transparency towards shareholders, the capital market and society in general.

A committee needs to be developed which checks whether companies are ...