The paper "Measurement in Accounting, Normative Accounting Theory" is a perfect example of a finance and accounting coursework. According to the Financial Reporting Council (2014), governance is termed to be effective if internal and external drivers involved directly. To ensure that internal management in organizations run efficiently, directors and managers of these companies must play a big role to provide that. However, it is observed that these managers have little or rather no influence over the external regulatory framework Further on, the article explains that managers go further than external financial reporting and structures of corporate governance and focus more on the operational areas of business management.
This is achieved by bringing about corporate governance ideas in the organizations and a culture where they focus on stakeholders as well as individual and corporate responsibility for the common interest (Financial Reporting Council, 2010). In reference to Accaglobal (2016) the agency theory as well as the agency problem. Therefore, this means that in a corporate organization, conflicts may arise regarding shareholder interests versus those of the board of directors. These issues, as a result, may lead to the need for having corporate governance codes.
The article further looks at the concept of traditional stewardship that acts as a basis for proper corporate governance within an external financial reporting framework. Lastly, the article looks at the differences between rules and principles by codes and how management is implemented within organizations. The article argues that when a wider and longer-term view of agency theory is applied and implemented within a broad group of stakeholders, it may lead to a better team spirit. As a result, positive attitudes and a pro-stakeholder culture will be observed throughout the organization.
In addition to that, significant connections between corporate governance and corporate culture and values have also been highlighted (Financial Reporting Council, 2010). Key Issues Several issues have been brought out in the article. The primary objective of an organization from the traditional perspective is to maximize profits as much as possible as well as increase the wealth of the shareholders. The degree upon which the search for wealth and profits dominates is dependent on the society’ s interpretation of agency theory. The significant focus is on the people responsible for dispatching responsibility, accountability and the structure of relationships as well as conflicts that may arise between principals and their agents (Financial Reporting Council, 2010). Secondly, the degree to which board of director’ s act to satisfy shareholder interests in the aim of maximizing wealth is dependent on several perspectives of the corporate social responsibility.
In this case, the shareholders are the principals whereas the directors play the role of agents in achieving company goals (Financial Reporting Council, 2010). Thirdly, by the stewardship concept, it is agreed upon that managers should ensure that the rights of stakeholders and shareholders in connection with the company are protected by company directors who are also known as stewards or agents.
Due to the conflicting nature of the stakeholders’ interests, stewards should be accountable for balancing these needs. According to the pristine capitalist view of stewardship, stakeholder rights and wealth maximization are of critical significance in a company. However, it is evident that corporate failures and banking crisis may lead to neglecting owners, stakeholders and even public needs (Accaglobal, 2016).
Accaglobal.com, A.(2016). Corporate governance - from the inside out | ACCA Global. Accaglobal.com. Retrieved 25 March 2016.
Financial Reporting Council (2010), Revisions to the UK Corporate Governance Code UK formerly the Combined Code, FRC
Financial Reporting Council (2014), UK Corporate Governance Code, FRC