Corporate Governance and Division of Power in UK, USA and Europe

Running head: ACCOUNTING THEORY
Accounting Theory
University Name
Student Name
Authors’ Note

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ACCOUNTING THEORY
Table of Contents
Introduction and purpose............................................................................................................2
Corporate Governance and firm’s board of directors................................................................3
Analysis of the rights of the shareholders and supremacy of the directors................................4
Benefits of shifting power..........................................................................................................4
Regulatory Responses to effective corporate governance.........................................................6
Conclusion..................................................................................................................................7
References..................................................................................................................................9

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ACCOUNTING THEORY
Selected Article for study: Corporate Governance e-journal: The existing division of
corporate decision making power in the UK, USA and Europe: A comparative perspective
penned by Shida Galletti
Introduction and purpose
The selected article under consideration takes into account different function and purposes of
shareholders, specifically institutional financiers in the area of corporate governance. This
study critically assesses division of power in the area of decision making in the legal system
of Anglo-America along with ramifications. Also, the study intends to explore whether
shifting of specific powers and authorities in the hands of shareholders can prove to be
advantageous for the corporations. In addition to this, the study at hand also intends to
examine the institutional financiers, their potential to assume a leading role in the running
business concerns. Moving further, the current research has the aim to address certain
regulatory reforms that need to be taken into consideration in particularly the UK, USA even
though it is believed that regulation is mainly prompted by the zeal to act to act in response to
a crisis rather than by the real need to re consider the current power allocation.
Corporate governance can be regarded as the arrangement of rules, exercises and procedures
by which a corporation is directed as well as controlled. Breitbarth et al. (2015) suggests that
corporate governance essentially entails balancing overall interests of a firm’s stakeholders,
namely shareholders, firm’s management, target customers as well as suppliers, investors,
government along with the entire community. Therefore, it is important to understand
actions, powers, authorities and primacy of the ones involved in the process of attainment of
good corporate governance. As corporate governance also delivers the framework for
attainment of objectives if the firm, it orients nearly every sphere of administration,
beginning from action plans, different internal controls to measurement of performance along

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with corporate disclosures. Essentially, the shareholder primacy premise is a leading principle
in corporate regulation that directs decision-makers of the corporation to concentrate on the
shareholders’ interests (Chang et al. 2015). However, validity of the notion can be examined
and analysed herein in context of UK as well as USA.
Corporate Governance and firm’s board of directors
The board of directors can be considered to be the primary stakeholder who directly
influences corporate governance. Essentially, directors get elected by various shareholders or
else get appointed by different members of the board (Chen et al. 2017). Essentially, directors
reflect shareholders of the business entity. In essence, the board has the task of making
significant decisions, namely corporate officer arrangements, executive recompense and
dividend strategy. In some examples, board necessities broaden beyond pecuniary
optimization, when resolutions of shareholder require definite social or else environmental
concern to be particularly prioritized (Comer 2017).
In essence, boards necessarily consist of inside as well as independent members. In essence,
Insiders refer to shareholders, various founders as well as executives. Again, there are
different independent directors who necessarily do not collaborate with the insiders (Dabor et
al. 2015). However, they are selected owing to their experience in handling and directing
different large business entities. Independents are necessarily regarded to be very helpful for
governance as they dilute power concentration and help in aligning interests of shareholders
with that of the insiders (Dimopoulos and Wagner 2016).