Corporate Governance

Question 1

What corporate governance?

Answer 1

the set of mechanisms used to manage relationships among
stakeholders and to determine and control the strategic direction and
performance of organizations.

Question 2

What is corporate governance concerned with?

Answer 2

concerned with identifying ways to ensure that strategic decisions are
made more effectively

Question 3

Why and where corporate governance is used

Answer 3

used in corporations to establish harmony between the firm’s owners
and its top-level managers whose interests may be in conflict.

Question 4

Agency relationship problems

Answer 4

• Principal and agent have
  divergent interests and goals.
• Agent falls prey to managerial
  opportunism.
• Agent makes decisions that
  result in the pursuit of goals
  that conflict with those of the
  principal.
• Shareholders lack direct control
  of large, publicly traded
  corporations.
• It is difficult or expensive for the
  principal to verify that the agent
  has behaved appropriately.