Corporate Governance .

Running head: CORPORATE GOVERNANCE
CORPORATE GOVERNANCE
Name of the Student
Name of the University
Author note

1CORPORATE GOVERNANCE
Introduction
The aim of the study is to delve deeper subjectively and objectively on the corporate
governance which can be ideal and good. The study breaks the myth of good governance by
suggesting the means to inculcate a good governance in an organization. The study also explores
the essential theories of corporate governance like the agency theory, stewardship theory,
resource-dependence theory which helps us to understand the concept of corporate governance
on a wider spectrum and analyze its vitality in the business organization. Corporate Governance
is a crucial element for the organization to operate efficiently and achieve the goals and
objectives of the organization in the right manner. It is the broad structure of process and
practices which enable the company to manage its business activities and affairs to ensure to
meet its long term sustainability (Tricker and Tricker 2015). There are many elements such as
laws which is based on the corporate legislations, court decisions, security regulators, securities
laws and policies, which are undertaken in the best interests of the company and good faith.
Further, there are many external factors which shape the governance structures such as the
shareholders, stock exchanges, interest groups and others whose influential role in the
organization mandate the directors to frame a right practices to be practiced in order to meet the
expectations of the stakeholders. Intense competition, dynamic market trends, and frequent
change in taste and preferences of the customers need to be studied and critically analyzed in
order to infuse the competitive spirit among the employees and promote a healthy competition so
as to attain the desired level of performance of employees in the organization (McCahery,
Sautner & Starks 2016). A good and ideal corporate governance ensures an accountable
management and help in establishing string and efficient internal controls, better engagement of

2CORPORATE GOVERNANCE
the shareholders, prompt risk management techniques, flexibility in the operations and meet the
targets and deadlines more effectively. Thus, a good corporate governance ensures a positive
growth trajectory of the organization and accelerate the growth and expansion of the business
operations.
To inculcate a right spirit in work force and enable them to adapt to the work culture, it is
essential for the employees to understand the structure of the governance. When all the
employees adhere to the structure of the governance and work according the organization
demand reinforcing transparency, accountability and responsibility among the professionals
(Khan, Muttakin and Siddiqui 2013). Corporate governance varies according to different types
and size of the organization, as there is no concept of one size fits all, rather every organization
has their own unique way of operation which has established their own way of functioning.
Based on their own performance level, right governance practices are formulated to enhance the
long term sustainability of the organization. An organization should build a qualified and
experienced board of directors having adequate knowledge, skills, expertise, experience which
are extremely relevant to the functioning of the organization and devoid of any kind of nepotism
in the board (Armstrong et al. 2015) This competent and versatile board of directors should
enthuse a strong set of ethics and integrity in a phased manner so that the gaps are filled
adequately. A competent team can identify the loopholes exactly and implement adequate
practices suitable in addressing the issues of the organization. There has been a lot of
interference in the functioning of the board of directors which makes the whole purpose
redundant hence they should be competent and independent and should not be a member from
the management team so that there is not any indirect or direct material relationship which could
influence or interfere in their judgment. Further, there should be a mandatory evaluation of the

3CORPORATE GOVERNANCE
performance of the directors so as to ensure that they are fulfilling their required duty timely.
The roles and responsibilities of the every directors must be well defined and conflicts of interest
must be addressed with adequate deliberation and discussion with the concerned stakeholders
and parties. The delegation of the task, evaluation of the performance of the employees
consistently, training them periodically in case of any new change or upgrading of the
management. There should be adequate mechanisms of reinforcing transparency and
accountability so that when responsibility is fixed on a person one should be accountable for that
particular task. This enhances productivity and faltering in their services is minimized (Du
Plessis, Hargovan, and Harris 2018).
Corporate governance spring from many theories among which the agency theory arise
from the difference between owners of an organization and executives who are appointed to
manage the functions or execute the activities of the organization. These owners or shareholders
are called the agent and agency theory explains that the agent has a different goal from that of the
principals and often are conflicting each other. It is assumed that the principal often suffer from
agency loss. This agency loss is the reduced return on investment as they do not play a direct role
in managing the company. This theory suggest to reward the executives financially which will
increase the profit of the shareholders of the company (Bushee, Carter, and Gerakos 2013). It
also suggest a supervisory board to control and monitor the performance of the agent so as to
protect the interest of the principals. The board are occupied in the managerial processes like
making deliberations to arrive at decisions and also equally accountable to the shareholders. This
distinction is a major cause of loss hence for increasing the productivity and profit of the
company the executives need to be given financial rewards so to fillip the growth trajectory of
the company. A common instance of agency theory is between the employers of the organization