CHAPTER_3 - CHAPTER 3 Corporate Governance PURPOSE AND...

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CHAPTER 3 Corporate Governance 0PURPOSE AND PERSPECTIVE Our approach in this chapter is to demonstrate that corporate governance is a fundamental aspect of social responsibility. First, we define corporate governance and integrate the concept with other elements of social responsibility. Next, we trace the evolution of corporate governance and provide information on the status of corporate governance systems in several countries. We also examine primary issues that should be considered in the development and improvement of corporate governance systems, including the roles of boards of directors, shareholders and investors, internal control and risk management, and executive compensation. Finally, we consider the future of corporate governance and indicate how strong governance is tied to corporate performance and economic growth. 0LECTURE OUTLINE I0. Corporate Governance Defined0 A0. Corporate governance is the formal system of oversight, accountability, and control for organizational decisions and resources.0 10. Oversight relates to a system of checks and balances that limit employees’ and managers’ opportunities to deviate from policies and codes of conduct. 20. Accountability relates to how well the content of workplace decisions is aligned with a firm’s stated strategic direction. 30. Control involves the process of auditing and improving organizational decisions and actions. B0. Companies want to develop, reinforce, and refine policies in order to achieve consistency across organizational decisions and actions. C0. Members of the directors and officers of corporations are fiduciaries for the shareholders. Fiduciaries are persons placed in positions of trust who exercise the duty of care and duty of loyalty in acting on behalf of the best interests of the organization. II0. History of Corporate Governance0 A0. In the late 1800s and early 1900s, the same people both owned and controlled corporations; therefore, corporate governance was less important to discuss. B0. During the twentieth century, however, an increasing number of public companies and investors brought about a gradual shift in the separation of ownership and control.0 10. By the 1930s, corporate ownership was dispersed across a large number of individuals. 20.
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This note was uploaded on 04/17/2008 for the course BUS 260 taught by Professor Schultz during the Spring '08 term at Carroll WI.

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CHAPTER_3 - CHAPTER 3 Corporate Governance PURPOSE AND...

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