Corporate Governance Essay Example | Topics and Well Written Essays - 2000 words - 2

Corporate Governance - Essay Example The Agency theory comes into place when the conflict of interest takes place between the principal (shareholders) and the agent (management of the organisation) and affects the corporate governance of the organisation. Agency theory presumes both the principal and the agent are encouraged by self-interest. This assumption of self-interest condemns agency theory to unavoidable intrinsic disagreement.   Therefore, if both revelries are enthused by self-interest, managements are likely to follow self-interested intentions that diverge and even clash with the purpose of the principal.   Thus, agents are expected to act in the sole interest of their principals (Saltaji, 2013). To resolve the corporate governance crisis, agency theory advocates a self-governing board arrangement and the application of equity-based reward for higher managements. This study helps to examine the degree to which agency theory proposals help to resolute the corporate governance issues. Corporate governance is the set of procedures, behaviours, guidelines, commandments and institutions distressing the way a conglomerate (or company) is directed and controlled. Corporate governance also comprises of the associations amongst the many stakeholders concerned and the objectives for which the company is administered (Larcker, Richardson and Tuna, 2007). In present-day business organisations, the chief external stakeholders are shareholders, debtors, trade creditors, trader, clientele and societies affected by the organisations performance. Internal stakeholders are the board of directors, management, executives and other employees (Bebchuk, Cohen and Ferrell, 2009). There are many diverse representation of corporate governance around the globe. These diverge according to the diversity of free and private enterprises in which they are embedded. The Anglo-American "model" tends to highlight the security and welfare of the shareholders (Denis