CORPORATE GOVERNANCE

Analysis of the Corporate Governance Systems



Table of Contents

Introduction1

Current Corporate Governance System2

Regulatory Framework for Corporate Governance3

Board Composition3

Accountability and Audit4

The Case of Enron4

Challenges in the Path of Improved Governance5

Corporate Governance Reforms6

Globalisation6

Disclosure of Confidential Information6

Misinterpretation of Financial Objectives7

Manipulation in the Accounting Numbers7

Social Economy Organisations8

Future Direction of Corporate Governance8

Systematic Risk9

Securitisation9

FASB and IASB9

International Coordination10

Critical Analysis10

Conclusion11

References13

Analysis of the Corporate Governance Systems

Introduction

The global financial crisis has shaken the economies of all parts of the world. The international financial collapse started in the mid of 2007 and proceeded until 2008. The stock markets have fallen immediately in different parts of the world. Not only this, the survival of financial institutions was in danger. The uncertainty and risks in the business transactions exceeded beyond imagination and one after another, many businesses failed. Therefore, the governments of all nations had huge pressures to come up with a strategy to reduce the hazardous impact of the financial crises. One of the initiatives in this regard is an improved system and policies of corporate governance (Berthelot, 2010, p.635-646).

The code of good governance or corporate governance should not be seen simply as a regulatory process that is intended to interfere with or regulate processes, but rather as the firm intention to demonstrate to stakeholders and investors that companies are transparent, effective, efficient and above all with a high sense of commitment to be better every day. Good corporate governance should not be considered as an issue than is fashionable, but as the real solution to the crisis of confidence and lack of credibility is perceived around the public sector undertakings and private, which reflect the results of their management operations and financial statements and questionable.

The Code of good corporate governance is based on logical principles and widely known in the financial field, such as equity, justice, honesty, and solidarity, both with interest groups to the same society in general that cannot be affected by the unscrupulous actions of white collar criminals settled in the power of corporations and public sector enterprises and private. However, this system has numerous flaws and challenges that need to be resolved in order to make it more effective and useful (Bebchuk, 2006, p. 1784-1813).

Current Corporate Governance System

According from the 1992 Cadbury Committee report on he Financial Aspects of Corporate Governance, Corporate governance is the system by which companies are directed and controlled. Board of directors are responsible for the governance of their companies. The shareholders' role in governance is to appoint the directors and auditors and to satisfy themselves that an appropriate governance structure is in place. The responsibilities of the board include setting the company's strategic aims, providing leadership to put them into effect, supervising the management of the business and reporting to shareholders on their stewardship (Travlos, 2002, p.461-483). The board's actions are subject to laws, regulations and the shareholders in general meeting. This definition has prescribed the best possible manners of how matters should be conducted within companies. It looks at the processes that happen at all levels in companies, which involve all ...