Corporate Governance Defined
Corporate Governance Defined
James McRitchie, 8/1999
Corporate governance is most often viewed as both the structure and the relationships which determine corporate direction and performance. The board of directors is typically central to corporate governance. Its relationship to the other primary participants, typically shareholders and management, is critical. Additional participants include employees, customers, suppliers, and creditors. The corporate governance framework also depends on the legal, regulatory, institutional and ethical environment of the community. Whereas the 20th century might be viewed as the age of management, the early 21st century is predicted to be more focused on governance. Both terms address control of corporations but governance has always required an examination of underlying purpose and legitimacy.
Mathiesen, 2002
Corporate governance is a field in economics that investigates how to secure/motivate efficient management of corporations by the use of incentive mechanisms, such as contracts, organizational designs and legislation. This is often limited to the question of improving financial performance, for example, how the corporate owners can secure/motivate that the corporate managers will deliver a competitive rate of return.
Sir Adrian Cadbury in 'Global Corporate Governance Forum', World Bank, 2000
Corporate Governance is concerned with holding the balance between economic and social goals and between individual and communal goals. The corporate 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.
Simon Deakin, Robert Monks Professor of Corporate Governance
Corporate governance is about how companies are directed and controlled. Good governance is an essential ingredient in corporate success and sustainable economic growth. Research in governance requires an interdisciplinary analysis, drawing above all on economics and law, and a close understanding of modern business practice of the kind which comes from detailed empirical studies in a range of national systems.
Sarah Teslik, former Executive Director of the Council of Institutional Investors
Corporate governance is what you do with something after you acquire it. It's really that simple. Most mammals do it. (Care for their property.) Unless they own stock. [She continues:] ... it is almost comical to suggest that corporate governance is a new or complex or scary idea. When people own property they care for it: corporate governance simply means caring for property in the corporate setting.
Corporate governance describes all the influences affecting the institutional processes, including those for appointing the controllers and/or regulators, involved in organizing the production and sale of goods and services. Described in this way, corporate governance includes all types of firms whether or not they are incorporated under civil law.
Margaret Blair, Ownership and Control: Rethinking Corporate Governance for the Twenty-first Century, 1995
Corporate governance is about the whole set of legal, cultural, and institutional arrangements that determine what public corporations can do, who controls them, how that control is exercised, and how the risks and return from the activities they undertake are allocated.
Monks and Minow, Corporate Governance, 1995
Corporate goverance is the relationship among various participants [chief executive officer,management, shareholders, employees] in determining the direction and performance of corporations.
Shleifer and Vishny, 1997
Corporate governance deals with the way suppliers of finance assure themselves of getting a return on their investment.
American Management Association
Corporate governance is about how suppliers of capital get managers to return profits, make sure managers do not misuse the capital by investing in bad projects, and how shareholders and creditors monitor managers.
International Chamber of Commerce
Corporate governance is the relationship between corporate managers, directors and the providers of equity, people and institutions who save and invest their capital to earn a return. It ensures that the board of directors is accountable for the pursuit of corporate objectives and that the corporation itself conforms to the law and regulations.
The relationship between the shareholders, directors and management of a company, as defined by the corporate charter, bylaws, formal policy and rule of law.
Corporate governance is the relationship among various participants in determining the direction and performance of corporations. The primary participants are: shareholders; company management (led by the chief executive officer); and the board of directors.
Corporate governance is the method by which a corporation is directed, administered or controlled. Corporate governance includes the laws and customs affecting that direction, as well as the goals for which the corporation is governed. The principal participants are the shareholders, management and the board of directors. Other participants include regulators, employees, suppliers, partners, customers, constituents (for elected bodies) and the general community.
The set of obligations and decision-making structures that shape 'the complex set of constraints that determine the profits generated by the firm and shape the exp post bargaining over those profits.
As Gourvevitch and Shinn, quoted in the above several paragraphs, note in their book
Where the political scene is capital versus labor, "the investor coalition defined corporate governance in terms of 'meeting the challenge of financial globalization,' adherence to the OECD Principles, fulfilling 'international standards of governance in the global competition for capital
From a labor power position, blockholders and foreign portfolio investors were castigated as selfish oligarch in league with the heartless IMF and the faceless gnomes of
Those favoring the corporatist compromise made much of managers and workers "being in the 'same boat' together, of corporate governance choices that ensured that firms 'served the nation' in a 'stable' economy - with owners dismissed as oligarchs or 'speculators.
Countries shifting transparency coalitions and managerism alignment "witnessed predictable invocations of corporate governance that protected 'the little guy, ' the individual investor,' the widow and orphans," such as speeches by U.S. SEC commissioners.
Meanwhile across the alignment divide, managers compete to hijack the notion of corporate governance for their own purpose...'building shareholder value.
Political Power and Corporate Control: The New Global Politics of Corporate Governance
Corporate governance - the authority structure of a firm - lies at the heart of the most important issues of society"… such as “who has claim to the cash flow of the firm, who has a say in its strategy and its allocation of resources.” The corporate governance framework shapes corporate efficiency, employment stability, retirement security, and the endowments of orphanages, hospitals, and universities. “It creates the temptations for cheating and the rewards for honesty, inside the firm and more generally in the body politic.” It “influences social mobility, stability and fluidity… It is no wonder then, that corporate governance provokes conflict. Anything so important will be fought over… like other decisions about authority, corporate governance structures are fundamentally the result of political decisions
Shareholder value is partly about efficiency. But there are serious issues of distribution at stake - job security, income inequality, social welfare. There may be many ways to organize an efficient firm.
NACD, 2005
Corporate governance refers to how a corporation is governed. Who has the authority to make decisions for a corporation within what guidelines? This is the corporation’s governance. In the
US Business Round Table White Paper on Corporate Governance September 1997
Corporate governance is not an abstract goal, but exists to serve corporate purposes by providing a structure within which stockholders, directors and management can pursue most effectively the objectives of the corporation.
Corporate Governance Forum of
Corporate governance by definition rests with the conduct of the board of directors, who are chosen on behalf of the shareholders.
