According to Crawford (2007, Corporate governance refers to the set of customs, policies, processes, laws and institutions which affect the way a company is controlled, administered and directed. This form of governance also includes the various forms of relationships among the various stakeholders who form part of the organizations body (El-Ashker 1987). This discipline has several facets, which include its several stakeholders like shareholders, board of directors, employed management, employees, suppliers, customers, creditors, and the general community (Skau 1992). Principal- agent problem is a very important theme in corporate governance and it helps come up with various mechanisms to ensure accountability of some individuals in the organization to deal with this problem. In this paper, I have dealt with this issue of agent-principal problem (Essid 1995).
Since 2001, there has been renewed interest in the practices of corporate governance especially after the collapse of some very high profile corporations around the world. Some examples of these include Enron corporate and MCI Inc. In the USA (Fahim. 1995). The perceived professionalism and quality in a company’s corporate governance has the capability to influence the share price as well as the cost involved when the corporation wants to raise capital (Federspiel 1992). The quality of corporate governance has been influenced by the financial markets, legislations as well as other external forces in the market place coupled with policy implementation and the way the people are led by the corporate executives (Gambling and Rifaat, 1991).
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