Corporate Governance

Corporate Governance

Corporate Governance

Introduction

The approaches of the corporate governance in two different industries have been discussed in this paper. The board of directors are the representatives of the independent shareholders of any firm. Their role is to ensure by way of supervision that the management of the firm works towards maximizing the return on investment for the shareholders and that they do not engage in any illegal activity. In order for this job of the board of directors to be performed with efficiency, it is essential that the board remains separated from the management of the firm. This has become a global trend and many countries have come up with lawn pertaining to corporate governance. Hence, the independence of board of directors from management is of crucial importance. The UK government too has come up with the Company law and the Corporate Governance Code for limited companies.

Discussion

I have two industries to discuss the corporate governance approach. The industries that I have selected are the banking industry and the retail industry (Bebchuk & Weisbach, 2010). The company's and the board should be focusing more on the accountability because then that will also affect the effectiveness and would help in creating better value for the company if the accountability measures that are taken more seriously because this can be seen as the basis for managing the companies major risk and evaluating and planning on lowering these risks. Or designing the plan in a way that it wouldn't be capable of going through risk and the chances will become lower. Any corporation that is formed under the Companies Act 2006 is regulated by the United Kingdom Company Law. The company formed under the Act is a legal entity and follows the Corporate Governance Code. Limited companies now make a major proportion of the UK economy. They employ more people and have a bigger scope of operations than a non-limited company. The modern corporate statutes that are followed by the world today were an innovation of the United Kingdom. The registration process in the UK for a limited company is very simple and gives the board of directors an advantage of limited liability. The commonwealth model became the standard setter whereby the companies were given a lot of leeway to design the internal rules as per their own requirements. The rules inside the company have to comply with the investor rights as given in the Company Act 2006 (Bebchuk & Ferrell, 2009).

The corporate finance deals with laws pertaining to the company's ability to raise funds for itself. This can be done in two ways, equity financing and debt financing. In equity financing, the limited company issues shares to build up capital for the company. In debt financing, the company gets loans from institutions such as banks and other at an interest. The company law not only protects the shareholders but also the debtors of the company.

Although the Company law in the UK has been enforced and the Corporate Governance Code is in practice, ...