Corporate governance has been a buzzword today like never before. It has piques the interest of the public due to its apparent importance in the overall economic health and society in general (ENCYCOGOV 2007 [online]). In a world where the public sector and national governments are being displaced by multi-national companies that drive the forces of globalization, many are interested in the different practices of corporate governance as a sense of accountability to its corporate citizens, the dollar voters, and overall social burden.

 

Corporate governance has therefore exceeded a mere economic definition and has integrated many perspectives from other academic fields. First, in the economic field, corporate governance is a field in economics that motivate efficient management by the use if incentive mechanism, such as contract, organizational design, and legislation (ENCYCOGOV 2007 [online]). The goal of such paradigm is to realize the best economic rate of return. This definition discusses how returns are perceived in an economic sense.

 

The context of economics today has exhaustive meanings that can be related to keywords such as politics, civics, and trends like fight for poverty and environmentalism. The latch of the definition of economic rate of return denotes a series of opportunities and its corresponding costs. Thus, the objective of corporate governance to maximize economic returns is multi-dimensional than ever.

 

The Financial Times (ENCYCOGOV 2007 [online]) described perfectly what corporate governance is today. Corporate governance is the narrow relationship of the company to its shareholders, and its broad relationship of the company to society. In addition corporate governance is the initiative to promote, fairness, transparency, and accountability.

 

Corporate governance has been the forefront of public affairs since a high number of collapses of large companies such as Enron and Worldcom (Wikipedia 2007 [online]). At the same time, it can be argued that the market penetration of multinational companies across different countries is more influential than the diplomatic penetration of national governments. Therefore, corporate governance holds power much stronger than in the past.

 

Corporate governance is hinged on common principles. First, corporate governance is accounted for the equal rights of the shareholder. Secondly, it bridges the interests of other stakeholders. Third, there are clear rules and guidelines for the corporate board on how they handle their duties as a corporate group. Fourth, corporate governance is grounded in integrity and corporate behaviour. Lastly, corporate governance should be predicated on transparency and full disclosure. These factors are not merely corporate exercises but also present an overlapping on economic accountability as against accountability to society.

Corporate control is another term for corporate governance. However, a close looks in definition affords different messages. A corporate governor in this dynamic is seen as an administrative officer. Effective corporate governance is highly related to motivation, transparency, and accountability, which are traits that reflect more on leadership than merely management.

 

Corporate governance is therefore, above economic and financial asides. In fact, corporate governance is also a political exercise of one’s owner. Thus, corporate governance and public trust in a more fluid economy is gaining closer correlation with each other.

 

References

 

ENCYCOGOV. (2007). Capital budgeting. Available: http://www.encycogov.com/ A8MarkForCorporateControl.asp.

 

Wikipedia. (2007). Corporate Governance. Available: http://en.wikipedia.org/wiki/Corporate_governance. Last accessed 18 October 2007.