Essays on Corporate Governance before the Global Financial Crisis Coursework

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The paper "Corporate Governance before the Global Financial Crisis" is a great example of business coursework.   Corporate governance refers to the laid down framework of rules and regulations which guides the board of directors of a particular organization in delivering accountability and transparency between the organization and its stakeholders (Stolt 2009, p. 2). A lot of focus in the study of corporate governance has been to address the key issues of aligning the interests of the owners of a firm to those of the management. There is general disbelief by shareholders that the interests of the management team do not necessarily reflect the desires of the owners therefore the need to align the two is crucial.

In the process, dominant theories have emerged such as the agency and stewardship theories which give a different approach to solving the problems associated with corporate governance. However, there was a shift of focus by researchers on the key issues affecting corporate after the failures witnessed during the global financial crisis to addressing the concerns that led to this crisis chief among them being incentive scheme design (Stolt 2009). Corporate governance before the Global Financial Crisis Much of the research on corporate governance has followed the path of identifying solutions to areas where failures have occurred.

For example, in the 1990s much of the researched was aimed at finding a solution to the conflicting arising from interests of analysts and brokers as a result of the burst of the high tech bubble. This prompted the revision of the OECD corporate governance principles with an introduction of a principle labeled ‘ V.F’ (Kirkpatrick 2009, P. 3). This principle asserts that the access to timely, accurate and relevant information by the board of directors is crucial if they are to perform their duties and responsibilities in an effective and efficient manner and guarantee the realization of the organization’ s goals and objectives.

Another corporate failure this time by Enron/WorldCom brought to surface another set of issues with regard to the independence of the auditor and the auditing committee as well as the inadequacies in the accounting standards. To address these concerns and seal the loopholes, the OECD once again revised is corporate governance principles, this time introducing principles V. B, V. C and V. D (Kirkpatrick 2009, p. 3, OECD 2004).

The most elaborate of them all being principle V. D which underscored a number of key functions of the board of directors. These include providing guidance and regular review of the corporate strategy, risk policy, business plan, the annual budget and major action plans; establishing the performance goals to be achieved; maintaining vigilance on the implementation and performance of the firm; monitoring and controlling huge financial expenditures, divestitures and acquisitions; overseeing the actions and initiatives of the key executives with mandate to compensate and replace underperforming individuals; reviewing the remuneration packages for the board and other key executives as well as the board nomination process is characterized by an atmosphere of transparency; monitoring keenly the accounting and financial reporting systems of the firm in order to ensure integrity at all levels and an independent audit process; examining and reviewing the effectiveness of all governance practices and initiating changes where necessary; finally monitoring the process in which disclosure of crucial and sensitive information is made (ROSC 2003, p. 13; Institute of Directors in Southern Africa 2009, pp-27-30, OECD 2004).

On the other hand principle, V.C underscored the need for the board to ensure that all the interests and concerns of the shareholders were taken into account. Moreover, the board should ensure that the firm complies will all applicable laws. Principle V. B aims to create a balance by asserting that all shareholders should receive fair treatment in cases where the decisions by the board seem to affect different groups of shareholders differently (ROSC 2003,p. 12).

Bibliography

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Stolt, R., 2009, Corporate Governance in Hong Kong, Grin verlag, Norderstedt, p.2.

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