The very role of a board of directors in the system of corporate governance is to oversee a corporation's business and affairs, including its management, because numerous dispersed stockholders cannot effectively perform that function on their own. But if directors incurred liability for every misstep they took, or bad decision they made, it would indeed be rare to find a person willing to serve as a director. In Delaware, where the majority of US corporations are incorporated, the hallmark fiduciary duties are the duties of care and loyalty. But if Delaware corporate law is considered the national corporate law, the Sarbanes-Oxley Act of 2002 is perhaps best described as its smash sequel. While competent, good, or best corporate practices vary from circumstance, from company to company...
Corporate governance is at the forefront once again. Pundits and government officials are asking how proper governance processes could have resulted in the decisions of financial entities that contributed to the current economic crisis. Corporate governance is the creation and maintenance of structures, procedures and relationships to provide appropriate oversight of a bank's operations and to enhance accountability, profitability and ethical conduct. When addressing corporate governance needs and concerns, boards of directors need to use good common and business sense. It is easy to forget that at the core of corporate governance is operating a healthy and profitable bank. Here are some points to consider: 1. Corporate governance is about running a successful business. 2. Directors, ac...
This study is focused on Corporate Governance of China's State-Owned Enterprises(SOEs) in which research was studied on the role of SOEs under Corporate Governance of CCP(China Communist Party) organization that has been not studied a lot in previous research. As a result of the case study of Baosteel, though China's SOEs accommodated western corporate governance system, the CCP organization in the corporate has been carried out the role of internal control mechanism which complements weakness of governance structure, and is giving positive influence on governance structure of SOEs as a distinctive character of China's SOEs through performance of political core function.
Previous corporate governance literature mainly focuses on boards' control over CEOs, and CEO-board power is regarded as a major determinant of such control. This study addresses not only the control role but also the service role of directors in corporate governance. In addition to power relations, CEO-board trust relationship is included as an explanatory construct of boards' behaviors towards CEOs. It is proposed that boards' trust in CEOs moderates the associations between board structure and control activities; and works as a mediator between social ties and board service. Limitations of this study and directions for future research are discussed.
While corporate governance may not dictate the economic prospects of developing countries, it certainly plays an integral role in shaping them. This Note contains a detailed analysis of the corporate-governance architecture of one such developing country, India, from its independence in 1947 to the present. The results are surprising: India's corporate-governance framework is sophisticated for a developing country. However, considerable room remains for improvement. This Note presents a series of suggestions designed to improve corporate governance in India. Most notably, India must reform how its boards of directors function, improve its enforcement mechanisms, redefine its corporate laws, and embrace corporate governance as a philosophy.
This paper investigates the relationship between a firm's corporate governance structure and the abnormal returns associated with acquisition announcements. Based on a sample of 294 acquisitions occurring from 1994 through 1998, it is found that acquiring firms have significant two-day abnormal returns of-2.71%. A multiple regression model that includes corporate governance variables has an Adjusted R-squared of 14.2% with board size, the sensitivity of the CEO's wealth to changes in share price, method of payment, and acquiring firm size all being significant explanatory variables.
Stefaniak and Robertson investigate whether two interactive factors (the significance of the audit mistake and the anticipated professional repercussions of mistake admission) influence the likelihood of disclosing an audit error. Lin and Hwang test the effects of two levels of audit committee independence (complete and proportional independence), and find both to have a significant effect in reducing earnings management. Cahill remarks that the activities of internal audit and the audit committee of non-executive directors are critical elements in the assurance process. Hüpkes contends that external auditors will commit a capital offence if they fail to collect and analyse critical financial and behavioural data.
Convertible debt is a well-recognized mechanism for reducing the agency costs of debt. This study examines whether firms that attempt to control agency costs of equity through strong governance structures, including chief executive officer compensation alignment and board independence, are more likely to use an agency cost-reducing debt structure such as convertible debt. We find modest evidence of a complementary relationship between strong governance structures and use of convertible debt among a sample of relatively larger firms.
Corporate governance theorists are at loggerheads regarding the moral claimants to corporate control. The traditional view would restrict control to the owners of the firm, i.e., equity holders, while others seek to extend significant governance roles to other 'stakeholders' who hold important, long-term relationships with the firm. Both are, as argued below, indefensible: the former leaves the firm and its actions outside the ethical sphere and implies that, while most human actions are subject to moral appraisal, those done for the sake of business, specifically, those undertaken by managers on the behalf of equity holders, are not subject to this same consideration; the latter eliminates the motivational/incentive structure that is at the core the efficacy of the modern business ente...
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