Corporate governance Essay Example | Topics and Well Written Essays - 2000 words - 3

Corporate governance - Essay Example This paper attempts to find the relevance of agency theory in explaining the rise of corporate governance worldwide. In order to achieve this, it will include two other frameworks of the firm as benchmarks: stewardship theory and stakeholder theory. The starting point for this paper is to give the different accounts of the rise of corporate governance using various reliable sources. The next step is to highlight the other two frameworks of the firm and explain how they can be used in protecting the shareholders’ investments. The chosen frameworks will then be compared with the agency theory in order to establish which of the three frameworks best describes the rise of corporate governance. There are various factors that can be used to explain the rise of corporate governance. Such factors include: Separation of ownership from control; the rise of prominence of institutional shareholders; insufficient checks on powerful executives which led to scandals; the treatment of companies as separate legal entities; corporate failures caused by insufficient controls; remuneration of executives; economic globalisation; and financial crisis These factors have been considered in UK by different reports that provide specific measures on corporate governance. Such reports include: Cadbury report, Hampel report, Higgs report, the combined report, and UK stewardship report. The rise of corporate governance can be illustrated in depth by looking at the contents of these reports because they address the above factors of the rise of corporate governance. This report was provided by Cadbury committee on December 1992 to address the financial aspects of corporate governance. The code principles are based on integrity, openness and accountability. Cadbury report requires that boards of directors should be accountable to their shareholders and both should play