The Importance of a Global Approach to Regulating Corporate Governance Essay

The Importance of a Global Approach to Regulating Corporate Governance - Essay Example Corporate Governance Corporate governance can be considered to be a recently coined term and has a significant impact on the business operations carried on by the companies (Solomon, 2011). Corporate governance is used in various ways and one particular definition is not sufficient to completely define corporate governance. Generally, a wide variety of issues that are related to the various ways through which business activities carried on by the business organisations can be directed or controlled is described through the term corporate governance (Turner, 2009, p. 5). If we look at it in a broad sense, corporate governance can be viewed as a system of codifying the conduct of business activities that are followed by different organisations. The wider issues that are related to improving the shareholders’ performance are also included in the corporate governance mechanisms followed by the companies. Certain issues that are associated with the company’s stakeholders lik e the accountability of the business firms towards fulfilling particular interests of the stakeholders are also addressed through corporate governance. Stakeholders constitute of anyone who has a relation with the company including the shareholders, customers, suppliers, employees, community, etc (Turner, 2009, p. 5). There are many theories which have evolved to address the growing development of corporate governance issues all around the world. According to Mallin (2007), some of those corporate governance theories include, the agency theory, transaction cost economics, the stakeholder theory, the stewardship theory, class hegemony, and managerial hegemony. The agency relationship is identified through the agency theory wherein one of the parties... The discussion and analysis in the paper followed in MNCs and the approach towards global corporate governance system suggest that although theoretically it can be beneficial for the companies but practically it is a challenging task. No consensus has been made as yet regarding the best system of corporate law that is suitable for all the organisations worldwide and whether the convergence of the corporate governance mechanisms followed in organisations worldwide would increase their performance. To be more specific it is still unknown as to whether a new hybrid model of corporate governance mechanism would emerge or not. The report makes a conclusion that the business environment worldwide is changing at fast rate and the corporate governance systems are required to adapt to such changes. It is quite inevitable that certain changes in the governance mechanism would occur but the big question lies behind the fact as to whether the corporate governance in a particular country would be able to successfully adapt to such changes or not. It is unlikely that some drastic change would occur to facilitate the global approach towards regulating corporate governance because the companies as well the investors are found to be reluctant to change a system that has been working well for them till now. With the increasing influence of globalisation, and with the organisational structure of MNCs becoming more and more complex, it is certain that some changes would occur in the corporate governance system.