| Corporate governance refers to the way in which | | | | role of contracting with agency and monitoring |
| the company is directed and controlled in order to | | | | agency issues and conflicts. The management is |
| achieve its strategic and operational goals. | | | | accountable to keep informed every |
| Corporate governance ensures a high standard of | | | | development, innovation, leveraged technological |
| accountability at all levels of the organisation. It is | | | | issues and changes in regulatory framework to its |
| all about management of business styles, | | | | agencies. It remains difficult or expensive for the |
| monitoring and controlling business activities, | | | | Corporate to verify that the agent has behaved |
| accountability to stakeholders and the degree at | | | | appropriately. The agent sometimes exercises |
| which stakeholders can influence the decisions | | | | managerial opportunism, which is the seeking of |
| made by the company's representatives. | | | | self-interest with guile Managerial opportunism |
| Corporate Governance has following learning | | | | prevents the maximisation of shareholder wealth |
| styles to direct and control company's | | | | Problems of the agency relationship , however |
| management functions and work efficiently. | | | | corporate should understand trade off between |
| - Review basic concepts of time value, project | | | | agency relationship and cost factor. It is also very |
| and firm valuation, capital budgeting, risk-reward, | | | | necessary for the corporate to have satisfactory |
| market efficiency. | | | | control and enforcement of good governance |
| - Review market structures, short and long-term | | | | through independent regulators and other bodies. |
| equilibrium, competition, normal and excess profit, | | | | Through regulatory framework, the company can |
| barriers to entry, monopolies. | | | | have efficient protection against insider trading and |
| - Identify how choice of capital structure can | | | | abusive self-dealing. The company can set up |
| affect various stakeholders and these | | | | independent directors and independent arbitration |
| stakeholders' response. | | | | panel for market related conflict resolutions. |
| - Understand how the choice of capital structure | | | | |
| and investment decision can affect the value of | | | | Investment Decision and Corporate Governance: |
| assets. | | | | The most of the company takes decision for |
| - Understand the role of contracting and | | | | their investment depending upon their regular |
| monitoring in addressing the agency issue and the | | | | routine requirement for different segments of |
| challenges that exist for efficient contracting. | | | | investment. Every company has different set of |
| - Challenges of corporate governance for | | | | standard procedure and different set of rules and |
| mergers, acquisitions and takeovers | | | | regulations. The management should disclose |
| | | | | foreseeable risk factors to stakeholders in any |
| Various business correlations with Corporate | | | | investments. The company's management has to |
| Governance | | | | trade off between potential risk and return from |
| | | | | particular investment. Investment decision makers |
| Corporate governance takes shape of many | | | | (top management) and marketing and operation |
| correlated and interrelated business activities | | | | managers (Middle management) have to comply |
| which influence and control whole business process | | | | and direct a link between proposed investment |
| and define accountability internally and externally | | | | budget and completion of project. Good corporate |
| at all levels of business management. | | | | governance doesn't encourage any communication |
| | | | | gaps from top to bottom level of management |
| Stakeholders and Corporate Governance | | | | hierarchy. Therefore Good Corporate governance |
| The company has accountability towards their | | | | influence whole process of investment cycle and |
| various stakeholders such as shareholders, | | | | create active market participates. The top |
| employees, accountant and financial consultant, | | | | management has to comply with both productive |
| Suppliers, business unions, agencies, regulators etc. | | | | and non-productive investment planning in order to |
| The management decisions and actions are | | | | satisfy company's stakeholders and increase |
| influenced by shareholders, employees, | | | | creditability and market share among investors. |
| accountant, suppliers, customers, bank-building | | | | |
| society on daily basis with proper disclosure of | | | | Performance Evaluation and Corporate |
| relevant information, accounts and financial | | | | Governance |
| statements. Corporate governance system should | | | | Good corporate governance has to have |
| protect and facilitate shareholder rights. The | | | | transparency of business standards and |
| system should facilitate equitable treatment to all | | | | procedures for performance evaluation. The |
| shareholders, including minority and foreign | | | | transparency may refer to comprehensive |
| shareholder. Corporate Governance should | | | | disclosure of all financial information and timely |
| recognise the rights of stakeholders established | | | | disclosure of share-dealings by insiders and |
| by law or mutual contract and encourage | | | | controlling shareholders. Corporate governance |
| co-operation between the corporate and the | | | | system should ensure timely and accurate |
| stakeholders to create value. Corporate | | | | information about financial situation, performance, |
| Governance should review employees' salary, | | | | ownership and governance. Good Corporate |
| bonuses, and performance-based long-term | | | | Governance should have clarity and |
| incentive compensation such as share options. | | | | comprehensiveness of the information and equal |
| Strategic decisions by top-level managers are | | | | distribution of information to all shareholders in |
| complex, non-routine and affect the firm over an | | | | order to avoid any disputes in company. Superior |
| extended period Other variables affect the firm's | | | | performance results in development in the |
| performance over time such as unpredictable | | | | company and increase significance of |
| economic, social or legal changes. Product market | | | | improvement of company's valuation. The |
| stakeholders Customers, suppliers and host | | | | management has to develop some strategies in |
| communities may withdraw their support of the | | | | order to control management functions and |
| firm if their needs are not met, at least minimally | | | | encourage business performance. The |
| Organisational stakeholders, Managers and | | | | management has to keep track record in |
| non-managerial employees similarly may withdraw | | | | innovation and development in different segments |
| support, reduce their work effort or even quit | | | | of company and disclose among stakeholders. |
| Effective governance produces ethical behaviour | | | | Corporate Governance should evaluate its |
| in the formulation and implementation of | | | | leadership in global market and its potential growth |
| strategies Governance mechanisms and ethical | | | | in global markets in order to maintain favourable |
| behaviour. The management should understand | | | | market share. |