Corp Governance and Ethics

Pradnya Bhere

Professor Dr. Ryan Mattson

FIN 5311 First Paper

July 16, 2016

Abstract

In past two decades, the corporate governance has emerged as an important disciple due to increase in fraud and financial malpractices in global corporations. This along with the globalization of financial markets has led to increased scrutiny of various corporate governance models adapted by contemporary joint-stock corporations. The corporate governance structure adopted by any given individual country constitutes of certain features which distinguishes it from the corporate governance in other countries. Each corporation’s corporate governance structure is influenced by the legal and regulatory framework of the country in which it primarily operates in addition to its own mission statement and bylaws.

The objective of this essay is to discuss the different forms of corporate governance models used globally and how these different structures have come into existence given differences in country-specific factors and conditions such as culture, legal structures, tax methods and methods of measuring performance. In order to achieve this objective, a review of main stream corporate governance models was done and a comparison to country with a newly developed corporate governance is carried out by discussing its governance mechanisms, why it looks the way it does and what determined the development of a given country's corporate governance structure.

Introduction

The corporate governance structure of any present day nation is driven by several influencing factors such as the framework which identifies the distribution of the rights and responsibilities among the different parties involved in the corporate governance (for e.g. the CEO, the board of directors, the management, shareholders, creditors, suppliers auditors, regulators, and other stakeholders like customers and the community); the actualities of the corporate environment in a given country and of the legal and regulatory framework it is subjected to; and at last the individual corporation’s articles of association. Even though the corporate governance methodology differs from country to country, region to region or corporation to corporation, the above mentioned factors affect the corporations in a similar way. Hence, you can gauge a model of corporate governance adopted by any given country.

In spite of the similar shared factors, every country’s corporate governance structure has unique nuances which differentiates it from the structure of the other country. However, three dominant or widely accepted corporate governance structures or approaches exist in today’s corporate environment - the Anglo/American model, the German model and the Japanese model.

All these corporate governance models comprise of the similar elements – the primary players in the corporations environment, the shared-ownership structure; the make-up of the board of directors; the legal and regulatory framework; the disclosure requirements for publicly traded companies; the required shareholder approval; and the relationship between key stakeholders. However, in spite of the business objectives being mostly universal – profit maximization, shareholder appeasement and customer satisfaction, it is obvious that corporate environments and governance structures can vary in substantive ways.