Corporate Governance law

4 Key excerpts on "Corporate Governance law"

• 

  eBook - ePub

  The SAGE Handbook of Corporate Governance

  • Thomas Clarke, Douglas Branson(Authors)
  • 2012(Publication Date)
  • SAGE Publications Ltd

    (Publisher)

  Corporate governance has competing definitions, but in Margaret Blair’s estimation encompasses the ‘the whole set of legal, cultural, and institutional arrangements that determine what publicly traded corporations can do, who controls them, how that control is exercised, and how the risks and returns from the activities they undertake are allocated’ (1995: 3). These expansive dimensions of corporate governance were narrowly translated in the Anglo-American world in recent decades with the increasing ascendancy of financial markets and intellectual domination of agency theory into an almost obsessive concern for the problems of accountability and control involved in the dispersal of ownership of large listed corporations, and a rigid focus on the mechanisms that orientate managers towards delivering shareholder value (Dore, 2000; Davies, 2005; Froud, Johal, Leaver & Williams, 2006). European perceptions of the role and significance of governance have changed in recent years towards the Anglo-American view, but often the change has proved partial with political leaders, regulators and business executives advocating the salience of shareholder value, while acknowledging the continuing legitimacy of stakeholder values.

  Hence the definition and meaning of corporate governance varies considerably according to the values, institutions, culture and objectives pursued: ‘Corporate governance may be defined broadly as the study of power and influence over decision making within the corporation. … Existing definitions of corporate governance are closely tied to different paradigms or ways of conceptualizing the organization or firm.’ (Aguilera & Jackson, 2010: 5). In a similar vein Davis (2005: 143) in New Directions for Corporate Governance suggests corporate governance refers to ‘the structures, processes, and institutions within and around organizations that allocate power and resource control among participants.’ However, Cadbury (2000) in work for the World Bank, recognized the role of corporate governance in contributing to the stability and equity of society and the economy:

   

  Corporate governance is concerned with holding the balance between economic and social goals and between individual and communal goals. The governance framework is there to encourage the efficient use of resources and equally to require accountability for the stewardship of those resources. The aim is to align as nearly as possible the interests of individuals, corporations and society.

  Diversity and convergence in corporate governance institutions

  Different approaches to the financing and governance of corporations in different regions of the world have prevailed since the diverse origins of capitalism (Hall & Soskice, 2001; Amable, 2003; Deeg & Jackson, 2006). The evolution of the corporate form can be traced from the family and closely held capitalism of the early 19th century with the protection of ownership rights; through to the managerial capitalism of the early 20th century with further protection for listed corporations and limited liability; and finally the popular capitalism of the late 20th century with protection of minority interests and mass ownership. However, different routes were followed in this evolution and different destinations reached in corporate practice, company law and associated institutional development of Anglo-American, European and Asian forms of corporate enterprise. In the Asian system of corporate governance stronger elements of family ownership survive intact, and in the European system more managerial forms have survived.

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  eBook - ePub

  Energy Law and the Sustainable Company

  Innovation and corporate social responsibility

  • Patricia Park, Duncan Magnus Park(Authors)
  • 2016(Publication Date)
  • Routledge

    (Publisher)

  Solomon defines corporate governance as the system of checks and balances, both internal and external to companies, which ensure that companies discharge their accountability to all their stakeholders and act in a socially responsible way in all areas of their business activity. 5 This definition is based upon the perception that companies can maximise their value creation over the long term, by discharging their accountability to all their stakeholders and by optimising their system of corporate governance. The Higgs Report also emphasised a strong link between good corporate governance, accountability and value creation thus: ‘the UK framework of corporate governance…can clearly be improved…progressive strengthening of the existing architecture is strongly desirable, both to increase corporate accountability and to maximise sustainable wealth creation’. 6 It was the introduction of limited liability and the opening up of corporate ownership to the general public through share ownership which had a dramatic impact on the way in which companies were controlled. The market system as exercised in the UK and the USA is organised, inter alia, in such a way that the owners, who are the shareholders of a listed company, delegate the running of the company to the company management. In other words, there is a separation between ownership and control. One problem that arises as a result of this system of corporate ownership is that the management do not necessarily make decisions in the best interests of the owners. In finance theory, there is a basis assumption that the primary objective for companies is shareholder wealth maximisation. In practice this is not necessarily the case. It is very likely that company managers prefer to pursue their own personal objectives, such as aiming to gain the highest bonus possible in a display of egoism

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  Business Ethics, Seventh Edition

  A Stakeholder and Issues Management Approach

  • Joseph W. Weiss(Author)
  • 2021(Publication Date)
  • Berrett-Koehler Publishers

    (Publisher)

  By way of example, Spencer Stuart’s 2013 corporate governance policy updates tighten its board responsiveness policy and recommend that shareholders vote “against” or “withhold” their votes for incumbent directors who fail to act on a shareholder proposal that received the support of a majority of votes cast in the previous year, as compared to ISS’s prior standard, which looked at whether the proposal received a majority of outstanding shares the previous year or the support of a majority of votes cast in both the last year and one of the two prior years. 73 The following section discusses the two laws best known for defining the regulations and best practices for companies and their boards of directors. Sarbanes-Oxley Act While the 2002 Sarbanes-Oxley Act (SOX) may seem like ancient history now, it was a direct regulatory response by Congress to corporate scandals, and stands as a foundational safeguard against corporate corruption. (PricewaterhouseCoopers called this law the most important legislation affecting corporate governance, financial disclosure, and public accounting practice since the 1930s.) 74 The “carrot” approach, or corporate self-regulation, did not work for Enron and other firms involved in scandals; Congress realized that a “stick” approach (laws, regulations, disciplinary actions) was also required. A summary of SOX shows that federal provisions were established to provide oversight, accountability, and enforcement of truthful and accurate financial reporting in public firms. Some of the major issues included (1) a lack of an independent public company accounting board to oversee audits, (2) conflicts of interest in companies serving as auditors and management consultants to companies, (3) holding top-level officers (CEOs and CFOs) accountable for financial statements, (4) protecting whistle-blowers, (5) requiring ethics codes for financial officers, and (6) other reforms as the list below shows

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  Corporate Governance in Asia

  • Julian Roche(Author)
  • 2005(Publication Date)
  • Routledge

    (Publisher)

  Chapter 5: Corporate governance and corporate strategy

  • The link between governance and strategy
  • Managing risk
  • A spanner in the works
  • Rewarding performance: the board
  • Rewarding performance: the shareholders
  • Related party transactions
  • Corporations and politics
  • Corporate governance and corporate social responsibility
  • Conclusion

  THE LINK BETWEEN GOVERNANCE AND STRATEGY

  This is the most difficult part of an analysis of corporate governance, and the least discussed. What does it make companies do differently? So difficult is this relationship to disentangle, indeed, that:

  Enterprise Governance is an emerging term that CIMA and others use to describe a framework that covers both the corporate governance and the business management aspects of the organisation. Achieving a panacea of good corporate governance that is linked strategically with performance metrics should enable companies to focus all their energies on the key drivers that move their business forward. . . . Enterprise governance considers the whole picture to ensure that strategic goals are aligned and good management is achieved.’1

  This concept of enterprise governance, however much one might suspect that the concept has been developed for the sake of it, perhaps has something to recommend it. After all, the conformance dimension of enterprise governance has had significant coverage in recent years and, in particular, in the last few years following the various corporate scandals. In contrast, the performance dimension does not lend itself as easily to a regime of standards and audit. Instead, it is desirable to develop a range of best practice tools and techniques that need to be applied intelligently to different types of organization. These tools and techniques are very much the domain of the professional accountant in business. The focus here is on helping the board to make strategic decisions and understanding its appetite for risk and its key drivers of performance. Implementation of strategy and its ongoing relevance and success must then be assessed on a regular basis.

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