Corporate governance has gained unprecedented prominence in recent years. The failures and successes of modern corporations are equally responsible for this rise in prominence. Modern corporations thus are not simply victims of external conditions that have imposed corporate governance on them but also created the very circumstance that made corporate governance imperative. It cannot be denied that spectacular corporate failures and the abuse of managerial power contributed significantly to the rise in phenomenal growth is social power and influence of corporations equally contributed to them taking responsibility for balancing their own interest of those of the societies and the natural environment in which they operate. Corporate governance geared towards ensuring that companies take responsibility fair to their stakeholders. Two qualifications however need to be added immediately. First, this responsibility can either be taken voluntarily by the boards of directors of companies or it can be imposed on them by regulating authorities or by a combination of both. Second, the scope of stake-holders toward whom the company should be responsible is a contested.
Does Corporate Governance Matter?
Capitalism is thus called because it is an economic system organized around the production and allocation of capital. The savings of individuals are the basis of all capital. Yet the ways in which economies accumulate and allocate capital are quite different in different countries, and seem closely related to how each country handles corporate governance issues. Individuals can save by investing in corporate stocks and bonds. Companies they view as good bets can raise huge amounts of money by issuing securities—as when Google raised $1.67 billion by selling new shares to the public in 2004.
Author: Sakshi Joshi