Corporate Governance: Principles, Practices, and Case Study Analysis

This report provides a comprehensive overview of corporate governance, examining its principles, pillars, and practical applications. It begins by defining corporate governance and its significance in structuring and managing corporations, emphasizing the importance of transparency, accountability, and security. The report then delves into the pillars of effective corporate governance, highlighting fairness, stakeholder management, and leadership. A significant portion of the report is dedicated to a case study of Theranos, analyzing the company's failure in corporate governance, the role of Elizabeth Holmes, and the impact of mismanagement. The analysis covers issues such as the dual-class structure of shareholding, misleading financial disclosures, and the absence of sufficient corporate governance skills within the company. The report concludes by discussing the importance of corporate governance in fostering investor confidence, ensuring corporate accountability, and improving the efficiency of capital markets. It also touches upon the relationship between capital markets and corporate governance, emphasizing how strong governance standards can facilitate access to capital and support economic growth. The report also touches upon the role of stakeholders, including shareholders, creditors, employees, customers, suppliers, and distributors in the success and competitiveness of the enterprise, also emphasizing the need for outside investors to protect themselves against expropriation by the insiders.

Running head: CORPORATE GOVERNANCE
CORPORATE GOVERNANCE
Name of the student
Name of the university
Author note

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Introduction
The conception of corporate governance has an extensive scope, and it involves both
institutional and social character. Thus corporate governance is the structure by which the
corporation and managed and administered. It stimulates the method the objective of the
corporation is structured and attained, the method of monitoring and assessment of risk and the
method by which the performance can be enhanced. Thus it is the set of principles, policies,
procedures as well as accountabilities and responsibilities that is applied by the shareholder to
overcome the disagreement of interest that is inherent in the company. Thus it is labelled as an
interface in between several participants such as the board of directors, stakeholders and the
corporate management in formulating the performance of the company and the method it is
progressing towards. Thus the principles of corporate governances tackle in identifying the
method to adopt an efficient strategic decision in addition to that improve added significance to
the shareholder.
Code of corporate governance
The code of corporate governance set forth the standards of good practices in connection
to issues such as development and composition of the board, accountability, remuneration, audit
and association of the shareholders of the company. The listed corporation is necessitated to
made reporting and the method that have implemented the core standards of the code of
corporate governance (Cooper 2017). In addition to that, they are necessary to report on either
they approve that they have observed with the provisions of the code or where they failed to do
so, they have to provide an explanation. There should be a conversation with the shareholders of

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the company rest on the combined comprehension of the objectives. The board has the
accountability for guaranteeing that the satisfactory discussion with the shareholders occur
(Adams 2018).
Pillars of corporate governance
The pillars of effective corporate governance are fairness, accountability, assurance,
transparency, stakeholder management and leadership. In amongst these, the major three pillars
are transparency, accountability and security. Transparency in simplest term implies the
company should allow transactions and processes visible to the outsiders. It also implies making
necessary disclosures and also to notify everyone who is affected by its decisions as well as co
ply with the statutory requirements (Nakpodia 2016). Thus transparency is the crucial
components as it guarantees the action of the corporation can be monitored by at any point of
time by the outside observer. Accountability as the pillar of good corporate governance plays a
crucial role to establish integrity in the corporation. Accountability also indicates taking liability
or answerability. The shareholder of the company has intense concentration about who will take
the liability in case anything went wrong. The third pillar of effective corporate governance is
security (Serra, Font and Ivanova 2017). The company is anticipated to make procedure
transparent and also there individually answerable while maintaining there enterprise information
secure from unsanctioned access. Therefore assimilating three pillars that are security,
transparency and accountability describe the integrity of the company ( Brunton, Eweje and
Taskin 2017).

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Case study
In Theranos, Elizabeth Holmes who is chairman and founder of the company established
with the Securities and Exchange Commission when she was accused with committing $700
million of deception against the public as well as to the investors. The innovators who pursue to
disrupt and revolutionize an organization should tell the investors the reality about what
technology can do today not just it hoped what it might do someday said by the director of SEC.
Corporate governance facilitates the outline for achieving the objectives of the company.
According to John Carreyrou, who published the book named Bad Blood, Secrets and
Lies in a Silicon Valley Startup. Holmes who student of Standard University who dropped out
college to inauguration a company assuring to make blood examination which was as convenient
as that of iPhone. However, Holmes constructed structure that was very unusual in the field of
corporate governance (Luyima 2015). As the founder, she has she had efficient, comprehensive
management with the dual-class structure of shareholding that importantly implies that everyone
vote than could be made by the shareholder. As James Angel and Wayne Guay discussed in the
podcast for “ Wharton School of Business “, Theranos was an instance of the failure of corporate
governance that defrauded investors of $700 million.
It envisages practically every aspect of management as well as corporate disclosures.
Theranos evidently deficit efficient corporate governance that stabilizes aspirations of Holmes
with transparency that is required for the suppliers, customers, financiers, government as well as
to the community. It was assured by Holmes that more than two hundred examinations would be
carried out with her novel technology. However, in practice about dozens of test were conducted.
She guaranteed to the investors that planned revenue would be $100 million approximately,
whereas, in fact, the revenues were closer to $100,000 in 2014. Therefore in the company, there

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was a toxic mixture of the untethered, unseasoned or ethically loose founder in management and
corporate board woefully lack of the skills of corporate governance.
Thus corporate governance is the procedure that affected regulatory, legal, market-based
and contractual mechanism in addition to that optimum practices to establish the considerable
value of the shareholder while safeguarding the interest of other stakeholders of the company.
The effective structure of the corporate governance enhances the confidence of the investor,
guarantees corporate accountability, improves quality and reliability of the public financial data
and also improves efficiency and integrity of the capital market and therefore it implies the
association in between capital markets and company (Jacoby 2018). The association exists as
because capital market facilitate funds to the company and thus regulates the corporate
governance support the interest of the administration with the interest of the investors. The
establishment of strong corporate governance standards facilitates optimum accessibility to
capital as well as assist economic growth.
Snake charmer and Snake oil
Furthermore the snake charmers and shake oil salesman, the corporate executives are
permitted by the stakeholders to loot the corporation subject to they produce reliable capital
advances to their heads by insisting persistent excitement and interest around the commerce.
Thus the stakeholders in the company do not act as the owner of the company they only conduct
as free riders. The agent and principals issues evolve in social interaction as well as equally
misinterpreted (Taran and Betts 2015). The corporate governance indicates to monitor best
practices at the time of performing the affairs of the corporation with a valuation of the risk
cover, get a prior cautious signal and start prompt remedial actions.

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Therefore in a similar manner, reducing the possible likelihoods of misappropriation and
fraud in the corporate. Thus the failure of corporate governance put adverse impact affecting
governance quality, financial statements, audit function as well as accounting standards that are
followed by the corporation (Hussain, Rigoni and Orij 2018). Nevertheless, the scandals, scams
insist on the belief for the required check as well as balances and discourse the problem of
governance which cannot be ignored. Good investors of the shareholders, regulatory compliance,
alertness and awareness in amongst them are some of the determinants which corporate require
to cohere for principles of corporate governance. In addition to that, it was also witnessed that
fraud of corporate house with the aid of financial or banking institution as they miscarry to
identify the fiscal mess of the corporate during the period of expanding loans or improvement to
the corporate (Lombardi et al. 2109).
Thus the chief object of corporate governance is to establish appropriate governance of
the activities of business along with satisfying the standards of governance as prescribed by the
regulatory or government authority. Nevertheless, governance is the systematic method where all
are related to the institution such as the board of directors, shareholders, employees,
management, creditors are anticipated to coordinate among one another for the process of
decision making of the corporation (Erdiaw-Kwasie, Alam and Shahiduzzaman 2017). Thus the
efficient corporate governance assures the accountability and responsibility of the board of
directors and management for attaining the objectives of business of the enterprise.
In a similar manner, the methodical monetary disclosures enhance the system of
information with the shareholders, stakeholders of the enterprise. Thus the rating methodology of
the corporate governance is grounded on the following. Firstly the quality of decision making of
the board of directors of the company. Secondly, the standard of application of the policy by the

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executives. Thirdly the ethical codes which include practices of good business. Fourthly the
customer services, which includes compliant redress method and quality service. Fifthly the
research and development that is the innovation of products and services. Sixthly, the
performance that is development in profitability, business and fiscal performance. Seventhly
disclosures and accounting standards that is industry parameters, international, compliance,
norms (Salin et al. 2017).
The importance of corporate governance exists not only to attain the aim of the
corporation; however, it establishes the management and board answerable to examine the same.
It is important for the community as it planning the optimum application of the scarce resources
obtainable in the economy of the country with the extreme return of the determinants of
production that is labour, the capital (Zalewska 2016). It concentrates on the ongoing
enhancement in the conduct of the company and thus enhances the profitability.
Factors leading to collapse of company
Mismanagement of the company evolves in Theranos happens as it is poorly governed.
Thus the instance of poor governance is the substance of concern, especially in the developing as
well as underdeveloped nations. Furthermore, accounting standards, disclosure norms, as well as
communications with the stakeholders, investors minimize uncertainty in the fiscal market
(Sarens and Merendino 2016). Good governance establishes optimist outcome on the
corporation for the growth of business in the financial sector governance is very much significant
to evade fiscal crisis. In another manner, governance denotes to organizing, planning,
supervisory controlling, directing as well as budgeting the administration of the institution by
owing responsibilities, authority, and accountability in the single basket in addition to that

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management of the organization as the corporate entity to the achievement for the advantage of
all concerned shareholders (Wasowska and Postula 2018).
“Good governance” and governance are the two diverse feature of the administration.
The leaders of corporate management must monitor good governance. The leaders of corporate
governance should monitor good governance. Self-discipline and transparency are also necessary
for between management, team members, board members and other shareholders that is
borrowers, debtors and depositors. Corporate governance traditionally connects with the agency
or principal-agent issue. The relationship of principal and agent evolves when the own individual
organization is not similar to the individual who controls or manages it. The financiers or
investors appoint managers to operate the company on their behalf (Bachmann, Gillespie and
Priem 2015). The investor requires specialized human capital of managers to produce a return on
their investments in addition to that managers might require funds of the investors as they might
not have sufficient capital of their own to devote (Turnbull 2016).
The approach of the shareholders to corporate governance is fundamentally focused on
supporting the interest of the shareholders and managers and also with guaranteeing the
movement of external resources to the enterprise. Nevertheless, the shareholders of the company
are not the only entity who are making investments in the company (Richter and Dow 2017). The
ultimate success and competitiveness of the enterprise is the impact of the team participation that
symbolizes contribution from the series of diverse capital providers involving investors,
creditors, employees, customers, suppliers and distributors (Ranängen and Lindman 2017). The
economic performance and corporate governance will be affected by the association amongst the
various shareholders of the company.

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Furthermore, in the context of sound corporate governance, the concentration must be
paid on how the outside investors safeguard themselves against expropriation by the insiders.
Thus corporate governance tackles the method in which the providers of finance to the enterprise
guaranteed themselves of getting profit on their investment. Thus recent cases of corporate
governance scandals have prompted the major insolvencies that have created a lack of
confidence in the companies. Nevertheless, beyond the crisis and scandals, there are several
structural factors describing why corporate governance becoming more significant for economic
growth and also well being.
Identification snake oil or snake charmer
The phrase snake Oil Salesman conjures the pictures of the speedy profiteers
endeavouring to misuse an unsuspicious public by vending it fake treatments. The snake-oil can
be designated as Quach panacea or remedy. Snake oil is the understatement for fraudulent
marketing. It indicates to mineral oil that is fuel-based or the snake oil that is applied to vend as
the treatment all elixir for any kind of physical issues. Snake charmers and snake-oil are the ones
that regulate the activities of the stakeholder of the firm. The supreme interest of both the
managers and the stakeholders is to enhance the worth of the stock ire-spective of the actual
price of the firm. Thus both of them are the focus with the conduct of the share somewhat than of
the activities of the firm.
The stakeholder and managers of the company are preoccupied with heightening the price
of the share rather than that of the business of the company. Henceforth the inflationary
managers contribute packets. The stakeholders appoint manipulators of stock of the company.
They are euphemistically termed as managers to produce expectation concerning the upcoming
assets of the share. Thus the causes of the downfall of the sound corporate governance are

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shareholders of the enterprise. Thus it is evident that nothing in the firm is happening by
coercion or accident. The shareholders of the firm are abetted and aided the recent crop of the
corporate managers enthusiastically. They have knowledge about what was going on. They
might not become conscious of exact character as well as the degree of the rot bur they have
experience approvingly insider trading, resetting of stock option, unloading, unwinding,
manipulation of share price, packages of outlandish pay, opaque transaction (Latif, Bhatti and
Raheman 2017). The investors stayed silent throughout the dishonesty in the company. The non-
executive directors and directors are reluctant to accept as well as executives would be undecided
to pursue compensation agreement that may be considered by the observers as outrageous.
Recommendations
Thus maintaining the standard of corporate governance need responsibility to all ranks of
the management. Henceforth the corporate culture and conduct grounded on the qualities of the
self-regulation as well as transparency donate major part to the essence of sound corporate
governance. In consideration of the present situation, researchers proposed several
recommendations for the good practices of corporate governance in the active capital market.
There the strategy of maintaining the current rank of confidence of the investor, the company
must keep its current practices of corporate governance under the continuous process of
evaluation. This can be attained by developing the statutory frameworks concerning corporate
governance in the view of the suggested changes in the conceptual outline. Furthermore, through
appropriate recommendation to enhance the process of functioning and motivating
administrative, accounting, legal and economic research that tend to finest practices to fulfil the
requirements of governance.

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Furthermore, tougher punishment should be applied for infringing the resolution of the
administrative assembly of the shareholders of the company in addition to that violating the
fundamental structure of the firm as well as non-application of the recommendation of the
committee of the audit. There should be an independent director who is employed in accordance
with the existing guidelines. The independent directors should have experience, integrity,
expertise, managerial qualities, foresight and the capabilities to reads as well as comprehend the
financial statements. The independent directors must not be for the sake of name; however, they
must be well acquainted of the progress of the company in addition to that should
enthusiastically participate in the procedure.
There is the requirement to construct as well as restore the confidence among the
shareholders and also enhance the integrity in the autonomous of the board in the perspective of
anticipation of the shareholders there are several guidelines that required to be implemented as
transparency and openness in conversation with the shareholders, transparent and objective
policies if whistleblower that is obtainable to the key stakeholders that are customers, employees
and also vendors and also to facilitate sufficient protection as against the victimization of the
whistleblowers. Furthermore having representatives of minority shareholders on the board as the
independent directors.
Conclusion
It can be concluded from the above-mentioned discussion that investors are the
significant stakeholder of the company. They are the vital player for the purpose if translating
good practices of corporate governance into the optimum entrance to capital for the company.
The sound corporate governance guarantees all stakeholders involving depositors are
safeguarded. The code of corporate governance will attain if everybody realizes their

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accountability. The corporate governance characterizes ethics framework, values framework, the
moral framework under which the decision of business is adopted. Moreover, fairness and
transparency in the competition of the market must be guaranteed.
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