The effectiveness of the various corporate governance policies and Essay

The effectiveness of the various corporate governance policies and approaches in the USA and United Kingdom - Essay Example The paper tells that during the last two decades, the business world witnessed a number of corporate scandals like the bankruptcy of Allegheny, Enron, Tyco, Global Crossing, WorldCom, and others. The bankruptcy of Lehman Brothers fuelled up the global financial crisis of 2008-09. All these corporate scandals and bankruptcies have raised the importance of corporate governance. The ultimate victim of all these scandals and crisis are the stakeholders who lose a large sum of money invested in the companies involved in these scandals. The investors take their investment decisions based on the information disclosed by the companies. Therefore, any type of wrongdoing or incomplete disclosure can cost a lot to the investors. Thus with every financial crisis and corporate scandals the relevance of corporate has increased largely. Governance refers to governing someone with the help of some specified system, policies and principles. Thus, corporate governance is the principles, specified proc esses, policies, and systems used to govern a company. The principles of corporate governance acts as the guidelines used to control the activities of the company so that it can it can achieve its objectives and at the same time add value to the organisation in such a way so that the stakeholders can be benefited in long run. Thus, corporate governance helps the management to operate in such a way so that not only the shareholders but also the other investors, employees, customer and the society as a whole benefit from the actions of the company. (Centre for International Private Enterprise, 2002, p. 3-4). The basic premise behind the principles of corporate governance is to enable the organisation to conduct its activities with fairness, maintain transparency in its operations and transactions, disclose all the relevant information, comply with all the rules, regulations and laws, be responsible and accountable to all its stakeholders, and maintain the code of ethics while conducti ng its activities. Practice of ethical activities is an important part of the corporate governance. Good corporate governance enables the company to achieve investors’ confidence and achieve goodwill in the industry. Thus, corporate governance is not only important for the stakeholders but also for the company too (Thomson, 2009). The Organisation for Economic Co-operation and Development (OECD) describes corporate governance as a system through which companies and other business organisations can be controlled as well as directed. Corporate governance helps to setup a structure through specifying the responsibilities and the rights of the various members of the companies like the board of directors, employees, and shareholders. Corporate governance sets the rules, regulations and the processes of decision making regarding the activities of the company. The corporate governance helps the company in setting up the companies objectives and goals, as well as enabling the company assess its performance and helps in achieving them.