The Meaning Of Governance - 45% Flashcards
Define corporate governance
It is the system by which companies are directed and controlled
What does corporate governance do ?
Reduces risk
Best practice guidelines
Ethical and effective management framework
Follow the spirit as well as letter of the framework
Accountability to executive management
What are the three aspects of an organisation
Collective goal
Social arrangement
Controlled performance
Define collective goals
I a profit making organisation this will be the maximisation of shareholder wealth. For charities and other not for profit organisations this will be maximising the benefits of its beneficiaries. These will include public sector organisation like schools and hospitals
Define social arrangement
Organisations are structured to allow people to work together towards a common goal
Define controlled performance
Systems and procedures will be developed to ensure individual, group and collective goals are met
What are the 6 types of organisations
Private sector
Public sector
Profit oriented
Not for profit oriented
Non governmental
Co operatives
What’s is the stewardship theory
The stewardship theory view the management of an organisation as its stewards tasked with managing assets in line with the wishes of the owners
What is the stakeholder theory
The stakeholder theory takes a wider view than stakeholder theory and states that management has a duty of care towards the wider stakeholder community as well as to the owners
What is the agency theory
The agency theory views the managers of an organisation as acting in an agency capacity seeking to service their own self interest and looking after the performance of the company only to the extent where this promotes their own interests. This gives rise to the agency problem
What is the resource - dependency theory
This study shows how the external resources of organisations affect this behaviour
What is the resource - dependency theory based upon ?
Organisations depend upon resources
Resources originate fro outside of the organisation
The environment will contain other organisations
Some necessary resources will be held by external organisations
Resources are a source of power
Organisations can come to depend upon each other
- the implication of this for directors is that they out to develop appropriate strategies for obtaining an exploiting the resources that their organisations require
What is corporate governance and company law ?
The regulation of corporate governance NOT changed directors statutory and fiduciary duties, including their duties of skill and care
What are directors behaviour ?
The corporate governance regulations ARE effecting the behaviour of directors
What are they key drivers of directors behaviour
- increased accountability & responsibility
- performance related pay
