Corporate Governance Law Assignment Example | Topics and Well Written Essays - 3000 words

Corporate Governance Law - Assignment Example According to Turnbull (1999, p. 189), corporate governance is defined as executive procedures and structural organization that is used to manage and direct business towards ensuring financial stability and achievement of objectives. Corporate governance is concerned with the relationship among the Board of Directors, minority shareholders, controlling shareholders, and the management. The history of corporate governance dates back to the nineteenth century when there was increasing emergence of limited liability companies in Europe and America (Klapper and Love, 2003, p. 28). Since then, the system has increased in prominence in many countries across the world because it has proved to contribute to sustainable economic development and the performance of companies. Minow (2002, p. 16) notes that the principles of corporate governance provide the framework for the following: disclosure and transparency, the role of non- financial stakeholders, the Board of Directors responsibilities, r ights of shareholders and other stakeholders and their equal treatment. OECD (2005) states that corporate governance law is at the core of corporate governance and further argue that it provides basis for various aspects of corporate governance hence making it effective. Corporate governance law provides framework for intellectual property, litigation, mergers and acquisitions, and other vital decisions that relate to corporate governance (Minnow, 2002, p. 71). ... Importance of Corporate Governance Before comparing and contrasting Anglo- American model and European model of corporate governance, it is crucial to understand why corporate governance is important and relevant to countries and companies. According to Bhagat and Bolton (2008, p. 260), numerous studies have shown that corporate governance plays an important role in facilitating and guiding the development processes of countries and organizations towards achievement of their objectives. Klapper and Love (2003, p. 33) argue that even though corporate governance is important for all the countries regardless of their social and economic status, the concept is more crucial in achieving public policy objectives in emerging market countries. Good corporate governance is essential in reducing the vulnerability of emerging market to financial crises, contributes to capital market development, reduces cost of capital and transaction costs, and reinforces property rights (La Rocca, 2007, p. 31 2). Basically, corporate governance is critical in addressing the issue of integrity especially regarding how the management and board of companies are discharging their duties. Apart from that, corporate governance provides the basis for setting up regulatory entity; it allows an organization to introduce regulation and oversee the proper implementation of the regulation. Additionally, this concept is vital in enhancing the institutions’ remunerations and financial policies which enable institutions to make profits and prevent the institutions from effects of financial crises (OECD, 2005). According to Minow (2002, p. 30), strong corporate governance practices significantly increase productivity,