Corporate Performance, Governance, and Business Ethics

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Table of Contents

Introduction
Corporate Governance in focus
Three mechanisms of Corporate Governance
Agency relationships
Works Cited

Introduction

Corporate governance (CG) is one of the most discussed topics in the present day business society. In every community of managerial character too many issues directly concern the points about this theme. People seem to feed their interests in better making out of this problem. The majority of businessmen, scientists, and ordinary observers tend to estimate corporate governance as “the general set of customs, regulations, habits, and laws that determine to what end a firm should be run.” (Business Society 2006)

Here another question should be considered – it is a fact which definitely distinguishes good or bad governance. A lot of factors are closely tied up with this concept in the business world. Some of them touch upon the theme of all interested sides’ activities: shareholders, board of directors, management team etc. That is why it is so useful for the corporate governance to maintain the relationships between the stakeholders in order to develop and determine control of companies’ strategic points and performance within competitors.

Corporate Governance in focus

In this paper more attention is grabbed on the mechanisms of CG, namely the internal ones which impact much as a complex of well-consolidated work of important constituent parts within a corporation.

The three internal mechanisms are mutually connected with the managerial and financial processes implemented in the external activity of a firm. Among such mechanisms the following ones can be pointed out:

Ownership Concentration. Relative amounts of stock ownedby individual shareholders and institutional investors.
Board of Directors. Individuals responsible for representing the firm’s owners by monitoring top-level managers’ strategic decisions/
Executive Compensation. Use of salary, bonuses, and long-term incentives to align managers’ interests with shareholders’ interests. (Hill, Jones 10-3)

Three mechanisms of Corporate Governance

For the purpose of strengthening the core objectives and ability to compete and lead in a definite field of interests companies strive to follow the sequential steps in maintaining reciprocal interests between the highest, middle , and lower layers of the corporation structure. Thus, the work of agencies is vital for the corporate governance in terms of hiring mangers and creating agency relationships. The point is that the owners of firms are deeply interested in the qualitative staff so that to minimize the losses of potential profits. Then mangers are involved in the work process for creating and putting in the picture specialists in risk management and in decision-making process. (Hill, Jones 10-8)

The thing is that when striving to succeed owners and agents have goals of various value and they specify the difference in horizons of aims. In return this can cause the conflict situations which can inflict possible gradual or temporal intermittences of a company. Though, principals tend to find out principal and appropriate fundamental base in order to prevent “managerial opportunism”. (Hill, Jones 10-10)

Agency relationships

To conclude, it is considered that the relationships between the stakeholders, board of directors, and principals, on the one hand, and agents, managers, and various specialists, on the other hand, stimulate the mechanisms of a corporation stable and efficient work, so that to prevent negative factors impacting on it in the internal relationships and to evolve innovative technologies and approaches for positive results in the month, quarter, and annual perspectives.

Works Cited

Hill, Charles. Jones, Gareth. Strategic Management Theory: An Integrated Approach 8th ed. Cengage Learning, 2007.

Strategic Management: Competitiveness and Globalization. Chapter 10: Corporate Governance. Web.

Business Society. A closer look at Business Education: Corporate Governance. The Aspen Institute. 2006. Web.

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Corporate Performance, Governance, and Business Ethics

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