![]() To achieve this, a company must establish strong board oversight, transparent communication, robust internal controls, and a commitment to social and environmental responsibility. This paper concluded that effective corporate governance is crucial for ensuring that a company can achieve long-term success and sustainability. The main objectives of this paper are to explore the concept of good corporate governance, examine the primary corporate governance models used in financial markets, identify key issues with corporate governance, and develop a theoretical framework for understanding the significance of corporate governance in international markets. This has led to increased attention and scrutiny of corporate governance practices, particularly following high-profile financial scandals such as Enron and Parmalat. However, while primacy of shareholder interests has been the dominant theme of corporate governance, at least in the US, for decades, there is no doubt that one of the most dynamic and important debates in the corporate governance arena, as well as in other areas of society, is the proper future purpose of the corporation.Ĭorporate governance has recently become a widely adopted management strategy for businesses operating in financial markets, both in developed and developing countries. While economists and corporate governance scholars from other disciplines recognized that the governance framework involved a variety of tools and mechanisms such as contracts, organizational designs and legislation, the primary question was how to use these tools and mechanisms in the best way to motivate and guarantee that the managers of the corporation would deliver a competitive rate of return. Traditionally, directors were seen as the agents of the persons and parties that provided the capital necessary for the corporation to operate-the shareholders-and corporate governance was depicted as the framework for allocating power between the directors and the shareholders and holding the directors accountable for the stewardship of the capital provided by investors. Setting the strategy for the corporation obviously requires consensus on the purpose of the firm, the goals and objectives of the firm’s activities and the parties who are to be the primary beneficiaries of the firm’s performance. Despite the prevalence of the former approach in research and policy, governance failures of particular corporations in developed economies and the difficulties of Central and Eastern European countries to build effective corporate governance regimes provoke questions whether these problems should solely be attributed to the shortcomings of particular individuals and corporations, or whether they are symptoms of more systemic governance failures. Broader meaning of governance denotes legal and habitual frameworks defining corporations and governing the pursuit of business within society (Hendry, 1998a), and involves a more extensive concept of accountability to stakeholders. Narrow meaning refers to the governance of the corporation in the interest of dominant stakeholder groups (usually the shareholders), raising the issues of board structure and performance, executive compensation, disclosure and accountability of management to shareholders (including the minority ones). Governance processes operate at multiple levels, which is reflected in definitions of corporate governance. ![]() It tackles the intrinsic nature, purpose, integrity and identity of the corporation, as wells as its strategic direction, socio-economic and cultural context, externalities and constituencies (Tipurić, 2008, 2011). Corporate governance denotes ‘the relationships among the participants in determining the direction and performance of corporations’ (Monks and Minow, 2001).
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