CORPORATE GOVERNCE

Corporate Governance in International Context



Corporate Governance in International Context

Introduction

Corporate governance is a management process system which has been far and wide investigated, relatively little or no proper attention has been given or provided to the system or process through which organisations are operated or governed. If organisational management is considered as a management tool for business management, then governance is considered as a tool to ensure that it is operating properly. The international 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.

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 emergence of corporate governance is given due to the responsibility they have boards and audit committees to provide security on the reliability of financial reporting, as it has been shown that the higher the quality of corporate governance greater reliability financial reporting. With corporate governance emerge a set of rules and guidelines that seek to govern the exercise of the entities to properly functioning capital markets, as these depend on the process overall financial reporting.

Discussion

Corporate governance advocates and reformers claim that good governance policies are essential for high performance. Relying on agency theory, scholars, and practitioners reason that if a company is paying attention to safeguarding the interests of its owners, the assets of the firm will be employed in a manner to minimize waste and maximize profitability, resulting in above average gains to shareholders.

Several studies using an overall score of governance have found a relationship between governance and shareholder returns, leading one commentator to observe that if companies with good governance are rewarded by better stock performance, companies whose cost of capital is lower will be motivated to make governance improvements. When individual governance practices are examined, however, such as insider equity ownership or executive incentive compensation, the link to performance returns becomes less ...