Corporate Governance: An Analysis of Theories, Ethics and Practices

This essay delves into the multifaceted realm of corporate governance, exploring its fundamental principles, theoretical underpinnings, and practical applications. It begins by defining corporate governance and elucidating its significance in regulating company conduct and behavior, emphasizing the roles of directors and shareholders. The essay then discusses various theories, including agency, stakeholder, transaction cost, political, stewardship, and resource dependency theories, providing insights into their core concepts and implications for organizational management. Furthermore, it examines the ethical dimensions of corporate governance, focusing on ethical leadership, code of conduct, and the alignment of corporate governance structures with corporate social responsibility. The paper highlights the importance of board composition, legal aspects, and the duties of directors in fostering effective governance. In essence, the essay provides a comprehensive overview of corporate governance, aiming to promote transparency, accountability, and responsible business practices.

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

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Introduction
Corporate Governance are the basic rules and guidelines which are laid down in a
company that is regulated by the directors of the company. The rules that have been made in
order to regulate the conduct and behavior of the individuals who are a part of the company those
rules are governed under Corporate Governance. In a company or any kind of corporation or
organization the management of the company needs to be regulated and therefore, there needs to
be an authority in the company who can regulate the management of the company. Therefore,
Corporate Governance is considered to be the process or that method by which the management
and the operations of a company are governed. The board of directors in a company are
appointed to manage and regulate the company and to carry out activities in a company which
would help the company in acquiring or obtaining the benefits. Therefore, the rules and
regulations that have been imposed on the company in order to govern the management of the
company is considered to be the method of corporate governance (Knudsen, Moon and Slager
2015). The shareholders of a company are considered to be the ones who invest in the shares of a
company and they appoint the directors in order to regulate the managing of the company. The
directors have certain duties regarding the company they are appointed into. They should be able
to work accordingly which would benefit the company but the benefits which are to be acquired
or obtained should not be in any dishonest way. The directors are appointed by the shareholders
of the company at times to carry out their self-interests in the country that would benefit the
shareholders as well as the company (Steger 2015).
This paper discusses the various aspects of corporate governance and the ethical behavior
of the individuals in a company. It discusses the various duties the directors have and the
composition of the board members in a company and the regulation which is to be done in the

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company and try to use those aspects. It would discuss the several principles and theories which
are related to corporate governance and try to implement them with the companies. It would
discuss the legal aspects of the corporate governance code and the significance of it. This paper
would then move towards discussing the ethical leadership and its significance, the integrity of it
in a company in compliance with the rules and regulations in a company. It also discusses about
the code of conduct in the company where the importance would also be discussed. In this paper
it tries to align the corporate governance structure with the corporate social responsibility. It
concludes by summarizing the discussion that was made in the paper and the outcome would be
laid down in conclusion.
Discussion
Corporate Governance is the method or the procedure in which the performance of any
company or organization is considered to be evaluated and regulated. In a corporate governance
structure the connection between the directors the shareholders and the management of the
company is looked after as they are the determining factors in an organization that would
determine the functioning and the operations of the company. Therefore, the connection between
these three factors are significant as they are considered to be the regulating the performance in
executing and implementing the working of the organization. The shareholders are considered to
be the people who have purchased the shares of the company and who would have the voting
rights in the company or the organization. The shareholders enjoy the power to vote in the
decision-making of the company and they appoint the Board of Directors in the company. The
Board of Directors act in accordance to the shareholders of the company and they have the
authority to regulate and govern in the matters which are related to the functioning of the
company (David Duffy 2019). The directors work in order to achieve or obtain any kind of

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benefits which the company would be able to accrue. It is upon the directors to function in a way
that would help the company benefit as an organization and therefore which would obtain profits
for the company.
Corporate governance is considered to be a process which would help an organization to
take strategic decisions which would be productive for that organization and it would be
effective. There are various significance or benefits if the process of corporate governance is
considered to be taken into consideration. The corporate governance structure helps in
safeguarding economic growth in a company and it assists in helping the company to grow
economically. The corporate governance structure tries to maintain the confidence of the
investors and tries to raise capital of a company or a corporation in order to grow as a business
(Camilleri 2015). A good structure of corporate governance helps in raising funds for the
company that would help the company as the share capital of that organization would rise and
therefore, this would boost the economy of the country. The good structure of corporate
governance assists the organization in raising funds or capital of that organization or corporation
which would help the company economically and motivate the employees of the company to
work towards achieving the best possible interests in the company (Haxhi and Aguilera 2015).
The corporate governance structure also effects the share price of an organization mostly
in a positive way. In this structure there are proper authorities given to the people and specific
duties and responsibilities provided to the individuals which would help the company or the
organization to work in a positive way and achieve the targets that are supposed to be achieved
in a positive manner. The corporate governance also considers to minimize the risk management
issue and provides for better safety procedures in a company or an organization. It also aims to
reduce the waste management in a corporation and tries to provide environmentally safe

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measures that would not be hampering the environment. Therefore, corporate governance
benefits an organization by assisting them towards achieving a better goal.
Various Theories of Corporate Governance
There are various theories in the corporate governance which can be implemented by
organizations in order to improve the work efficiency in the corporations. There are the agency
theory, the stakeholder theory, the transaction cost theory, political theory, stewardship theory
and lastly, the resource dependency theory. These theories are discussed in detail below.
 The Agency Theory: This theory discusses the relationship that is prevalent between an
agent and the principal and such a relationship is considered to be significant. An agent is
a person or an individual who is considered to work for the principal and to keep the
interests of the principal in mind. In an organization or a company the principal is
considered to be the shareholders of that organization who hold the shares of that
particular corporation they appoint the directors and the managers in an organization
which means that the directors or the managers of the organization work as agents of the
shareholders in that particular organization. The agents are considered to work in such a
manner which would benefit the organization as well as the shareholders of that
organization. The most distinctive characteristic of this specific theory is considered to be
that of the control and ownership. The ownership is that of the shareholders of the
company who invests and holds the shares in the corporation. The control of the
management is on the agents which are the directors and the managers of the
organization. Therefore, this is considered to be a distinct feature or characteristic of this
particular theory. The transparency and the accountability of the work are on the
management and the employees of that company.

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 The Stakeholder Theory: It discusses the accountability of the management and the
directors of the company to that of the stakeholders of the organization. This particular
theory focuses on the management decisions of the organization or the company. The
managers of a company are considered to be responsible towards a lot of people who are
a part of the organization such as the employees or the workers of the organization, the
stakeholders of the company, to the board members, investors, suppliers and others.
Therefore, the responsibility of the management is considered to be huge and the decision
making of the company matters needs to be discussed by the management to the selected
authority. In order to maintain the transparency and the accountability of the management
to the other members of the company consist of the stakeholder theory which would
depict the accountability of the management towards the members of the organization.
 The Transaction Cost Theory: In an organization it can be understood that there are
several contractual agreements between parties and this also involves the cost of the
parties in the agreement. Therefore, the transaction which is carried out by the company
or the corporation in order to grow in the organization is the transaction and the cost is
the price or the amount in which the company tries to transact while being in the market.
Therefore, this is considered to be the transaction cost theory. If the price in the market is
higher then the organization tries to pay for the transaction which would take place.
 The Political Theory: The company gives their voting rights or powers to certain
politically influenced personnel which would assist them by achieving benefits. This
political influence is considered to be beneficial because it helps in allocating power and
authority to a corporation or a company and it gives certain privileges along with
benefits. Therefore, this theory deals with the political influence of a corporation.

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 The Stewardship Theory: This theory mentions and discusses that the stewards are
considered to maximize the wealth and the profits of a company or a corporation by
trying to increase the performance of the company or corporation. It tries to proliferate
the wealth by improving the working efficiency of the organization. This would create
profits and gains for the company and its respected share holders which would be better
for the economic growth of the corporation. Therefore, this theory aims to maximize the
profits of a corporation by enhancing the work performance of the individuals who are
working in the corporation (Madison, Holt, Kellermanns and Ranft 2016).
 The Resource Dependency Theory: In this theory the role of the Board of Directors are
considered to be pivotal in nature since they are the ones who try to bring the resources
which are essential for the corporation in order to increase the interests of the corporation
and to increase the growth of the corporation economically. The main purpose of the
directors in a corporation is to act in the interests of the corporation or the company.
Therefore, a company in order to function needs to be able to work in a way which would
benefit the economic growth of that corporation. Thus, resources are required in the
corporation which are the responsibilities of the directors working in that corporation.
Therefore, to gather resources that would help the company in attaining benefits for the
corporation is considered to be the focus area or the main concentration of the resource
dependency theory.
Therefore, from the above-mentioned theory it can be understood that in order for a
corporation or an organization grow there are various things that need to be kept in mind and
there are certain responsibilities to each of the members of the organization which needs to be
done in an effective way for the organization to benefit and grow economically. The theories

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which have been laid down if followed are considered to be beneficial for an organization since
it lays down the functions of the members who are working in the organization to function in a
way which would accrue benefits for the company and the corporation and therefore, it would
help and assist the corporation to grow economically and achieve the benefits and the privileges.
Thus, the structure of corporate governance is considered to be beneficial for a company or a
corporation since it assists the company to work in a way which would acquire benefits.
Corporate Governance and Management
Corporate Governance is considered to be a basic set of rules and guidelines which are
laid down for a company in order to govern the companies or the corporations which would
assist the companies in deriving any kind of benefits. The rules and guidelines are laid down for
all the corporations which are to be followed and the conduct and the working efficiency are
managed and governed by the directors of the company. There are policies and procedures which
are laid down in the company which needs to be followed in order for the company to work in an
efficient manner. Therefore, the policies and the rules are laid down to govern the company so
that the corporation in question can grow economically (Hopt 2015).
Management is considered to be the procedure in which the people who are a part of an
organization take actions which would make the company or that organization go in a positive
direction. It would help the corporation reach great heights which would pose as a positive
impact on the working of the organization. The management takes actions and imposes duties on
the employees of the organization in order to work in an effective manner which would help the
organization grow. There are management teams in a company. These teams are usually set up
when the founders of the organization or the directors are unable to manage the employees since
there are increased number of employees in the organization. The management teams are made

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to ensure the efficiency of the working in the corporation and to overlook the activities of those
individuals working in an organization in order to increase the economic growth of the
organization and to obtain benefits or profits in the company (Ferrero Ferrero and Ackrill 2016).
The Corporate Governance structure works along with the management in a company as
the policies and guidelines which are laid down in a company in order to be followed are carried
on or conducted by the leaders of that association or organization since the regulations are to be
implemented by the management of the company or the directors and the founders. Therefore,
the corporate governance structure along with the management of the company are considered
interlinked and they complement each other by carrying out the operations of a company in an
effective way (Tricker, R.B. and Tricker, R.I., 2015).
The Role of Board of Directors in an Organization and its Functions
The Leadership Role of the Board
The role of the Board of Directors in an organization are considered to be significant as
they regulate the functioning of a company and manages the operations of the organization. The
Board of Directors are considered to be appointed by the shareholders or the shareowners of an
organization in order to carry out the functions of the company. The shareholders appoint the
directors in an organization to act on behalf of these shareowners and try to obtain and acquire
benefits for the corporation. The directors act as agents for these shareowners in the company
and they carry out the functions of the corporation on behalf of the shareowners interest. The role
and the duty of the directors in an organization are considered to be acting in the interests of the
company and to acquire interests which would be best suitable for the company. Therefore, the
directors have to work in accordance with the interests of the company and should not keep its

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main focus on the interests of the shareowners of that corporation. The shareholders who have
their own self-interest appoint the directors and these directors act as the agents of such
shareholders which have been mentioned in the Agency Theory. The directors even though act as
agents of the shareholders concentrate on acquiring benefits for the company and the self-interest
of the corporation is given utmost importance and not the self-interest of the shareholders.
The Board of Directors in a corporation are considered to be liable and responsible for
their actions. They are accountable to the several shareholders who are a part of the corporation.
The Annual General Meeting is held where the directors have to present with several reports
whereby the condition of the operations of the company are evaluated and assessed which helps
in maintain transparency and accountability. If the company faces any kind of difficulty then the
directors of the company would be liable to the shareholders of the company and they are
answerable for their actions in the company. In that meeting the directors would also submit
themselves in order for them to be re-elected and remain being a part of the Board. The policies
and procedures which regulate and govern the company are considered to be laid down in the
Articles of Association of the company. The purpose or the objectives of a corporation are
considered to be laid down in the Memorandum of Association. The main purpose of the Board
is to manage and regulate the functions of the corporation collectively and to carry out the
activities which would ensure the interests of the corporation as well as the interests of the
shareholders and the investors of the company.
Appointment of the Directors in a Board
The shareholders of the company do the selection of the directors in a board mostly and
they have the power to remove a director from the board if they please. The Board however,
have the power to appoint a director but the power of removal of the director rests with the

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shareholders of the corporation. The removal of the director can happen by a vote by majority of
the shareowners of the corporation and a special procedure has to be followed. The procedure is
considered to be difficult and complex and it cannot happen or occur without any legal advice.
Chairperson of the Board
The chairperson of the Board is considered to be the chief director of the company. The
Board consisting of the directors in a corporation enjoys the power to appoint any person within
them to be the chairperson of that corporation and they decide how long the chairperson of that
corporation is to hold the office for that post. The chairperson of the corporation enjoys the
power of casting a second vote if there is no equality among the members of the corporation to
come to a conclusion as such. The deciding vote would be that of the chairperson of the
corporation’s only if the rules and regulations which have been laid down for the corporation
states such a power to the chairperson. The policies which have been laid down as rules for a
corporation usually gives the Board of Directors the power to remove a chairperson from the
Board if the actions of the chairperson effect the functioning of the company. The role of a
chairperson in the Board is to act as a guiding authority for the Board of Directors and to manage
the functions of the directors in the company. It also looks after the Board composition and the
structure of the Board And tries to manage the duties and responsibilities of the Board along with
the other members of the Board which would help the Board to function in an effective manner.
It also organizes and coordinates the meetings of the committee and conducts those meetings in
an effective manner. The chairperson in an organization is considered to be the leader of the
Board and should look after the needs of the members associated with the organization.

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Role of the Directors in a Board
The Directors are appointed by the shareholders of a company in order to look after the
matters and affairs of a corporation thus their role in a company or any corporation is essential.
They have the responsibility to work or manage the working of a company in such a way that it
would make the company obtain profits and create a favorable position for the shareholders in
the company. The directors of the company should work in such a way that would be beneficial
for the organization but they have to work in an honest way and should not misuse the powers
which are vested on them and neither should they abuse their powers and responsibilities by
using their position in the company. The directors should carry out their work in the company in
a proper way with a proper purpose. They should not act in a way which would hamper the
company and should not work dishonestly. They should work in good faith. The directors of the
company has the responsibility to act in a way which would prevent the company from running
in losses or incurring the losses which would effect the functioning of a company. They should
prevent the organization from being insolvent. The directors at times are considered to be
responsible or liable for the debts that have been incurred by the company which means that the
directors are responsible for the debts and they owe a duty towards the company in acquiring to
dissolve those debts if they are considered to be personally liable and therefore, if the directors
are unable to pay for the debts which have been incurred by the company to the creditors of those
companies then the company would become insolvent and the liquidation process of the
company are going to be initiated and processed because of such insolvency of the organization.
The directors in an organization are also considered to be acting in interests of the
workers or the employees of the organization. Therefore, the directors need to be able to consider
the needs of the employees in a company and try to respect it and help the employees in need. In