Corporate Governance, a Concept Which Has Succeeded Term Paper

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Corporate governance, a concept which has succeeded in attracting a lot of public interest due to its perceived importance for the corporations' and society' economic health in general has been accorded several definitions. Shleifer and Vishny (737) defined corporate governance as a concept that deals with the manner in which suppliers of various financial services to corporations somehow assure themselves of getting some good return on their investment. OECD (1999) on the other hand defines corporate governance as a system by which various corporations are effectively directed as well as controlled. The structure of corporate governance specifies the form of distribution of rights as well as responsibilities among various different participants in a given corporation. The participants include the board of directors, managers, stakeholders as well as the shareholders. The corporate governance structure lays down the rules as well as procedures to be used for making various decisions on the relevant corporate affairs. The structures also provide a framework for setting the company's objectives and monitoring of corporate performance. Merchant & Van der Stede (577) noted that corporate governance should be spearheaded by the board of directors while being aided or monitored by controllers and auditors who are all concerned with the ethical issues related to management control (Merchant & Van der Stede 631)

The basic principles of corporate governance

There are several basic principles that act as the foundation and basis of corporate governance.

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The very first one is the need to ensure that the corporate governance framework that is put in place should help in the promotion of a transparent and yet efficient markets that are consistent with the rule of law while able to clearly articulate the various divisions of responsibilities that exists among various regulatory, supervisory and enforcement authorities (OECD 17).

The second basic principle of corporate governance relates to the rights of stakeholders as well as the key functions of ownerships. This is important since it protects as well as facilitates the exercising of shareholders' rights (OECD 18).

The third basic principle of corporate governance relates to the need for having an equitable treatment of all shareholders. This is important in ensuring that there is an equitable treatment of the entire shareholder (foreign and minority shareholders included). All of the shareholders must be provided with the opportunity of a thorough redress for any form of violation of their basic rights (OECD 20).

The fourth basic principle of corporate governance relates to the role of shareholders in instilling governance. This means that the corporate governance framework must fully recognize….....

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