Corporate Governance



Corporate Governance

Introduction

The United States is usually considered as being the classic case of the market-based or shareholder-oriented approach to corporate governance. There is dispersed ownership of corporations but includes high commitment from investors of institutions for instance pension funds. There are small corporate boards and possess high amount of independent or outside members and use working groups to develop board processes. It is true that corporate governance system of United States has been criticized heavily recently because of failures at WorldCom, Tyco, Enron and other dominant organizations. These criticisms and failures have appeared as catalysts for regulatory change and legislative change. The stock market and economy of United States have been performing well on absolute basis as well as in relation to other countries for the past two decades. . It is true that corporate governance system of United States has been criticized heavily recently because of failures at WorldCom, Tyco, Enron and other dominant organizations. The stock market of United States has sustained to break other wide indices as the scandals broke out.

For the period of last 15 years, in academic research the topic of corporate governance has turned into the basic and important topic. The structural changes that occur in the political economy of the world during the period of 1980s and 1990s, though, turned it into further important in order to scrutinize carefully on the issue that how legal and social arrangements affect markets, economic growth and firms across nation. Corporate governance can be described as the collection of institutions and control mechanisms, which helps in protecting the dealers of assets to an organization, mainly stakeholders, suppliers of equity assets. The general accounting office of the United States of America has observed that almost 10 % of all recorder organizations announced as a minimum one financial statement restatement in the United States between 1997 and 2002.

Discussion

Specified the intensity and volume of criticism of corporate governance of United States, it can be thought that the stock market of United States would have performed and operated extremely poorly. This concept amongst people would have developed since 2001 when scandals broke out. Total returns can be seen from the Table 1 regarding aggregate European, Pacific and United States stock markets. Though the stock market of United States has had depressing returns for the past numerous years. Stock market of United States has performed well in relation to stock markets of other countries, both currently and over the long time. In reality, the market of United States has produced returns at least not less than as compared to production of market of Pacific and Europe. The outcomes of stock market of United States also appeared to be favorable when compared with outcomes of stock markets of superior individual countries which include Germany, Japan, France and Great Britain that structure the indices. As there are several factors that affect returns of stock market therefore it will never be appropriate to declare that superior corporate governance of United States clarifies ...