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Government
Government
Importance of government
To ensure that organisation are properly run in the best interest of their stakeholders.
Why need corporate government
Stewardship theory
People in power. Will act in the benefits of those who engaged them
No interruption of self-interest of directors to corporate goals.
Defined by relationship between directors and shareholders
Interest of other stakeholders assumed to addressed by relevant outside laws
Agency theory
Assumes that people have a self-interest egoist approach
Relationship betwween agent and principal
Agent are premitted to act in place of and make decision on behalf of principal
Agent may not naturally act in the best interest of the principal
Key assumptions
All individual will act in their own self-interest
Agent are in a position of power
Three type of agency costs
Bonding cost
Residual cost
Monitoring cost
Cost arised as a result of
poor communication
poor understandings
Information asymmentry
innocent and unintended self-interested behaviour by agent
deliberate legal self-interest behaviour
illegal self-interested behaviour by agent
The system by which companies are directed and controlled and accountability is assured
Responsibilities of the BOD towards investors and other stakeholders, and involves setting of objectives and direction of the company.
