Contemporary corporate governance issues Essay Example | Topics and Well Written Essays - 2750 words

Contemporary corporate governance issues - Essay Example Corporate governance has emerged as new buzzword in the modern world as far as the world of business is concerned. Generally, corporate governance is concerned with activities aimed at directing and controlling the activities of an organization, and this is done through establishment of structures, rules, and procedures that are critical in decision-making process (Baker and Anderson, 2010). The rise and development of corporate governance has brought into perspective the role, position, and importance of different stakeholders of a company. In most cases, the function, capability, and continuity of a company are attached to the behavior and relationships of different stakeholders (Baker and Anderson, 2010). The company has different stakeholders who, in one way or the other, contribute to the success and performance of the company. Major stakeholders of a company include board of governors, chief executive officer, management team, employees, customers, suppliers, society, and share holders (Davies, 2006). However, in recent times, there has been emerging debate with regard to the role and level of importance of different stakeholders of a company. There are those who view shareholders given their role as proprietors of capital to be the most important stakeholders and whose needs the company has to serve (McTaggart and Kontes 1993). On the other hand, there are those who think that, although shareholders have played a key role in providing capital and other critical investments, their possession without responsibility translates to nothing, and as a result, they have to give equal importance to other stakeholders such as employees and customers (Mallin, 2007). Still, there is another group that believes that a balance can be created so that there is no particular favor of one stakeholder, and that all stakeholders have to be considered equal and their needs satisfied equally without sabotaging the needs of others (Brink, 2011). Therefore, it may take time befo re perfect and meaningful consensus is reached. However, this is likely not to bring to stop the continued debate on the role and level of importance of different stakeholders. More debates, suggestions, criticisms, and all kinds of discussions are likely to come up in an attempt to divulge more information and understanding on these new emerging issues in corporate governance. Motivated by these aspects, the aim of this paper is to concisely make an argument with regard to the extent a company exists for the benefit of its shareholders. In doing so, attempt is made to discuss agency theory and the potential problems likely to emerge when such theories are put into practice. Shareholders Shareholders in any organization are viewed to be the suppliers of capital, and in return, they are likely to demand for corporate efficiency, honesty, productivity, and profitability (Freeman, Harrison, Wicks, Parmar, and De Colle, 2010). In this way, shareholders are perceived to possess and execu te certain powers that directly show the ability to control the functions. In doing so, the shareholders are motivated by their investments in the company, which they want or demand to bring positive returns and profits (Bain and Barker, 2010). For a long time, theories such as agency theory have tried to evaluate the role and position of shareholders and subsequently, justified why there is need to maintain and enhance shareholders value as a paramount thing in the organization and throughout its lifetime (Mallin, 2007). Shareholders, as the prime investors in the organization, are perceived to be the owners of the company and their interests are likely to supersede all other interests. Once they have invested in the company, shareholders are likely to manifest different motives, behaviors, and even ambitions. All these