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Corporate Governance

Corporate Governance

 

 

Art der Uni-Arbeit: Seminararbeit

Fachrichtung: Business Management

Autor/-in: Miko Hoffmann

 

 

Introduction

 

The past decades have been marked by numerous events that have had a lasting impact on the global economy, companies and investors. The biggest financial crisis since the great depression in 1929 had arisen in October 2008 and almost led to the collapse of the entire global financial system. As a reaction to this, an intensive discussion under the banner of ‘corporate governance’ began, first in the US and a little later in Europe.

The aim of this essay is to examine one of the greater problems in Corporate Governance - the fundamental problem between management and its shareholders. On this basis, both internal and external corporate governance mechanisms will be examined. In a final step, the conclusion will sum up and critically review the findings.

 

Principal Agent Theory

 

The principal agent theory as the third approach of New Institutional Economics is the subject of this paper and will be examined in more detail below.

The main idea of the theory is the division of labour between a principal and an agent (Jensen and Meckling, 1976). The principal and the agent are subject to a contractual relationship in which the principal receives a service from the agent and the agent receives remuneration in return. In 1973 Ross presented approaches that deal with the economic consequences of a delegation of decision-making powers by the principal to an agent, who can also opportunistically exercise his decision- making power against the principal (Ross, 1973).

 

 

Conclusion

 

The aim of this essay was to present different approaches to help PLCs to solve agency problems due to the conflict between principal and agent. This goal has been achieved during this paper and is now to address critical aspects.

In research, corporate governance is often only examined from the perspective of one theory. And yet, there are many voices that want to prove that the agency theory, which is often used in corporate governance research, has serious flaws (Aguilera and Jackson, 2003). On the one hand, the monitoring role of the supervisory board must be treated in a more differentiated and holistic way. Moreover, re-search in corporate governance must also take into account the other central roles of supervisory boards. For this purpose, it is necessary to sufficiently deal with broader theories. The Stewardship Theory, for example, intends to show that strategic decision-making in a company can be improved by the Supervisory Board sup- porting top management (as stewards) in the holistic shaping of the company's future (Davis et al., 1997).

In summary, it can be said that this essay has only dealt intensively with a partial aspect of corporate governance. For a more holistic view of the topic, the use of further theories for a holistic investigation is recommended.

 

 

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Blog info

  • Corporate Governance
  • 2020-12-30 03:51:10
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