Political tradition, culture and other social values of a society and its institutional structure determine the purpose of a society. Companies incorporated under different societies often have less in common that one would be inclined to think.
Traditionally the term corporate governance has always referred to a system whereby the board of directors administers the corporation and lays down business policy executive officers act as agents of the board and execute its decisions and the owners of the corporation (shareholders) elect directors and vote in GMs on key business issues ranging from amendments to the company’s statutes, to mergers and major corporate sales.
In a previous article, we have tackled the theme of corporate governance from a director’s point of view. Nevertheless, in light of today’s relatively recent phenomenon, where more and more companies are resorting to financing from capital markets rather than through bank loans, a discussion on a “shareholder/stakeholder-oriented” model of management, is inevitable. It is clear that the role of shareholders and other stakeholders in corporations is gaining more and more momentum. However, the question remains: where should management allegiance be focusing?
All stakeholders have become more significant in the corporate pyramid with the natural consequence that their rights need to be afforded more adequate protection. Employee representation on boards, effective redress for the violation of their rights, and strict disclosure requirements are indispensable measures to ensure proper stakeholder and investor protection.
