The paper “ Governance in a Globalizing World” is a pathetic variant of the assignment on management. Corporate fraud cases have raised concerns about the responsibility of directors and how liable they are when the company goes under. Directors are in charge of running the companies on behalf of the shareholders. Consequently, directors who are acting dishonestly need to be criminally investigated and if found guilty they have to be liable to imprisonment and repayment of funds acquired dishonestly. Shareholders have entrusted the directors with the responsibilities of steering the company to achieve its mission and goals.
Agency theory defines their relationship. Being a director offers status as well as a direct impact on the success and strategy of a business. The daily management of a company is usually delegated to directors by the shareholders. Directors are appointed by shareholders but they normally appoint additional directors according to the regulations spelled out in the articles of association. The agency theory explains the relationship that exists between agents and principals in business (Lan and Heracleous, 2010). Shareholders entrust the company executives to run the affairs of the company on their behalf.
Agency theory resolves around resolving challenges that exist in agency relationships owing to unaligned goals or differing levels of aversion to risk. The agency theory addresses the hurdles that may arise owing to the differences between the desires or goals between the agent and the principal. This situation happens to owe to the fact that the principal is not aware of the actions that are being performed by the agent or he is barred from accessing crucial information on the operation of the company.
Therefore the shareholder's trust that the company’ s directors will do everything in their interest in maximizing wealth but not their personal gain (Segrestin & Hatchuel, 2011). When it comes to misappropriation of the company’ s resources and misuse of funds, the directors of the company are liable and have to be criminally investigated. The directors should liable to those cases which incriminate them directly and personally.
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