Corporate Governance and Financial Regulation

Bailout and Corporate Governance of US Auto Industry

American Auto Industry was severely affected by the imports of Japanese cars, which were of higher quality and lower cost than US auto cars. The imports in the last few years had risen significantly; because the cost of US assembled cars had increased significantly. US auto manufacturers increased pressure on the government to raise restrictions on the import of Japanese car to protect the local industry. Government had set import quota for Japanese car to protect the local industry. However, financial crisis and increasing car pricing affected the performance of the companies and companies faced tough times. They had to go to the government for the bailout program. However, such a move had a negative impact on the company and its performance. The companies became aware that in any condition government would not let these companies to go down or go bankrupt. In this way, they stopped thinking about the importance of Corporate Governance and improving company performance. However, in the following section, we will discuss the importance of strong Corporate Governance activities and its impact on Company overall performance.

Corporate Governance

According to the practical implications of the concept of corporate governance, theoretically, it refers to the fostering of transparency, corporate fairness and accountability. However, the precise and explicit definition of corporate governance is unknown to many people even now. Some of them consider the term governance in a narrower view by attributing it to the way through which the responsibilities and liabilities of accountants and auditors towards the shareholders. While, others define corporate governance as a relationship between the organization and society, that blurs the actual difference between corporate social responsibility and corporate governance.

However, OECD gave a precise definition of the term in 1999 saying that the corporate governance is a methodology which controls and monitors the businesses. There are many rights of the distribution of responsibilities and rights of different people taking part in the governance matters, which are specified in a modern structure of corporate governance. The stakeholder such as shareholders, managers of the board and other relevant members formulate the procedures and rules of the corporate affair's decision making (OECD, Online).

Through the entire process is a structure to set the organization's objectives and tactics for achieving them are also provided to the company. Moreover, it is the way of accomplishing those goals and supervising the controls and guiding the performance. If any governmental airlines were leased forty years ago, the fleet of the company would feel bad. However, the organizations in the present century are experiencing the concept of corporate governance which has helped it enhance its effectiveness and efficiency.

Centuries have passed ever since the concept of governance has been applied in law as well as economics. The concept has been perceived as a social control of contracts, for the purpose of protecting rights and taking collective action. In reality, corporate governance is connected with the workforce within organizations. It is furnished by organizations ...