Theoretical Perspectives on CG Flashcards
What is the focus of Agency Theory in Corporate Governance?
Focuses on resolving conflicts between principals (shareholders) and agents (management), emphasizing mechanisms to align managers’ actions with stakeholders’ interests.
What are the limitations of Agency Theory?
It tends to encourage short-termism, overlooks broader stakeholder interests, and is based on the assumption that managers are inherently self-serving.
What does Stakeholder Theory emphasize in CG?
It broadens the accountability of corporations to include all stakeholders affected by corporate actions, advocating for their interests to be integrated into corporate decision-making.
What are the criticisms of Stakeholder Theory?
It may dilute corporate focus and accountability by trying to meet the diverse needs of multiple stakeholders, potentially leading to conflict and inefficiency.
What is the Premise of Stewardship Theory?
It posits that managers are stewards whose interests are naturally aligned with the objectives of the shareholders, advocating for less control and more empowerment of managers.
How are external factors integrated into corporate governance theories?
External factors like legal requirements, market dynamics, and cultural values influence the applicability and emphasis of different governance theories in various environments.
