Corporate governance

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Corporate governance refers to the system by which corporations are directed and controlled. The governance structure specifies the distribution of rights and responsibilities among different participants in the corporation (such as the board of directors, managers, shareholders, creditors, auditors, regulators, and other stakeholders) and specifies the rules and procedures for making decisions in corporate affairs.


  • Corporate governance is concerned with holding the balance between economic and social goals and between individual and communal goals. The governance framework is there to encourage the efficient use of resources and equally to require accountability for the stewardship of those resources. The aim is to align as nearly as possible the interests of individuals, corporations and society.
  • Freeman is the acknowledged father of the stakeholder approach. His Strategic Management: a Stakeholder Approach (1984) introduced the concept of stakeholders, all of those individuals or groups other than shareholders (or owners) who have a stake in the particular decision or action of companies. The book proved to be a landmark in the development of stakeholder theory, a theory of management and business ethics that emphasises morality and ethicality in managing organisations. This theory was a departure from the dominant Anglo-Saxon approach that grants priority to shareholders and independence of management.
    Nowadays, the stakeholder approach is mentioned in virtually every publication on corporate governance and corporate social responsibility. By interacting with their stakeholders and societal context, organisations are able to establish their (social) responsibility system, enforced in part through laws and regulations but also increasingly voluntarily through company codes and business principles. The stakeholder theory is applied within various scientific disciplines ranging from business to law, from politics to health.
  • Berle and Means’ book remains the point of departure and the central reference for reflection about corporate governance. It has given rise to differing, even contradictory interpretations, which explains how it could be used in support of opposing theories, notably on the question of the relationship between shareholders and managers. Thus, it has been used to argue in favor of the shareholder conception that is now dominant, even though it contains, as we shall see, a conception of the corporation that is radically different to the contractualist view that underpins the current doctrine of shareholder primacy.
    • Olivier Weinstein (2012). "Firm, property and governance: From Berle and means to the agency theory, and beyond]." Accounting, Economics, and Law, Vol. 2 [2012], Iss. 2.

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