Aspects of Executive Incentives and Corporate Governance : Report

Added on - 04 Jun 2020

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Corporate Governance
TABLE OF CONTENTSINTRODUCTION...........................................................................................................................1Theoretical perspective or framework.........................................................................................1Describing background in relation to the creation of executive incentive mechanism incorporate governance...................................................................................................................2Critically evaluating the roles and the effectiveness of mechanism pertaining to executiveincentives.....................................................................................................................................3CONCLUSION................................................................................................................................5RECOMMENDATIONS.................................................................................................................5REFERENCES................................................................................................................................6
INTRODUCTIONCorporate governance may be served as a process which in turn lays high level ofemphasis on effectual supervision and control. Such procedure is highly significant as it helps inevaluating the extent to which management acts are in accordance with stakeholder’s interest.Governance role is highly concerned with giving overall directions to the enterprise andcontrolling the actions of management that directly contributes in the attainment of stakeholder’sobjectives. The present report will shed light on the manner in which aspects of executiveincentives and corporate governance are highly linked with each other. Besides this, it alsodevelops understanding about the theories that are highly associated with corporate governancestructure. Report will highlight the role and effectiveness of concerned mechanism with the helpof theoretical findings.Theoretical perspective or frameworkFrom assessment, it has identified that agency theory is highly suitable which providesassistance in evaluating the role of executive mechanism in corporate governance. Hence, agencytheory has been selected with the motive to evaluate the role of concerned mechanism in thecontext of governance and analyzing firm’s performance (Agency theory, 2017). Agency theorydescribes or presents relationship that takes place between agent and principal. In this, agentassumes that principal will perform activities and functions without their own self-interest orbenefits. Such theoretical framework believes two tier form of firm control (Pepper and Gore,2015). Hence, such theory clearly explains relationship between shareholders and executives ofan organization. On the basis of such theoretical framework shareholders considered as principalhire executives for performing activities on their behalf.Agency theory is highly significant that deals with two specific problems or issues. Themain focus of such theoretical aspect is to ascertain the way that helps in aligning the goal ofprincipal so that agency problem does not occur. It also focuses on reconciling differenttolerances for risk in relation to principal and agent (Shogren, Wehmeyer and Palmer, 2017). Bydoing evaluation, it has found that there are several factors or aspects due to which conflicts take
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