Directors Duties in Corporate Governance - Coursework Example

The functions of corporate governance are more strategic and overarching as they are concerned with moving a company toward a direction that is consistent with its long-term values and objectives. For individual companies, an appropriate framework of corporate governance that is well coordinated by a properly functioning board of directors serves to increase confidence in the firm’s long-term viability.

Good corporate governance helps in building trust and credibility with investors, company creditors, employees, and all the other stakeholders. At the national level, corporate governance is a determinant of national competitiveness, which helps in the establishment of the legitimacy of corporate activity by the rest of society's governance. IntroductionArd and Berg (2010), argue that many problems of the GFC can be traced to flawed implementation of good governance principles and excessive short-term remuneration.

These were notably apparent in some of the largest and most sophisticated financial institutions globally. Ard and Berg (2010), suggest four areas that have been identified as contributing to GFC namely, risk governance, remuneration, board professionalism, and shareholder engagement. There is diversity in corporate governance globally. Differences arise due to the varying sizes, different sectors, and the general lifecycle stages of corporations. However, the nation remains the main driver of corporate governance variation.

For example, prominent multinational corporations engage in similar economic tasks, i.e. the manufacture and distribution of the same goods but their activities are subjected to entirely differing frameworks of monitoring, oversight, and control due to the unique governance environments of their respective countries of incorporation. However, global market forces have an impact on governance practices. Large publicly-quoted firms around the world increasingly conform to international standards of corporate governance or best practices as is known by organizations such as the OECD (Organization for Economic Co-operation and Development, the EU, and the International Accounting Standards Board.

Such conformity behavior helps the organizations in winning the favor of capital market investors. Consequently, organizations, gain access to external finance at the lowest possible cost. Such globally operating practices are yet to override the importance of national-level factors in determining governance choices though its significance is felt by the smaller, non-listed enterprises in the corporate sectors of most economies. The SME (Small and Medium Enterprises) segment is less exposed to the capital market influences that affect larger companies.

In addition, ‘best practices ‘reflects the continued importance of domestic politics and regulation on the national business environments. Relatively, other factors of relevance to corporate governance behavior such as the intensity of competition in local product markets, norms of business behavior, and corporate ownership structures, will vary significantly globally.