Insight of Corporate Governance Theories

Abstract

Abstract:The progression of theories or models of corporate governance, it is one of the new dimensions taken in a very crux of social ethics that is minimal and profit making took center stage. In this competitive world, companies are trying to inculcate the wisdom of good governance into their corporate organization. With the massive outpouring of capitalism, companies became stronger while governments around the globe had to accede to its influences and supremacy. However, this paper is a review of literature on the variety of theories in corporate governance. The ultimate theories in corporate governance started with the agency theory, extended into stewardship theory and stakeholder theory and evolved to resource dependency theory, political theory, legitimacy theory and social contract theory. However, these theories discourse the cause and consequence of variables, such as the formation of board structure, audit committee, independent non-executive directors and the duties of upper management and their organizational and social responsibilities rather than its regulatory structures. Similarly, it is proposed that a mixture of various theories is best to describe an effective and efficient good governance practice rather than hypothesizing corporate governance based on a sole theory. JEL Classifications: M00, M1

Corporate Governance and Profitability of Listed Food and Beverages Firms in Nigeria

“…Over the last decades, the government of a country has been seen to have a strong political influence on firms (Yusoff and Alhaji, 2012). As a result, there is an entrance of political wheel into the governance structure of firms' mechanism (Hawley and Williams, 1996).…”

“…It assumes that corporate governance must increasingly become more democratic to be seen as legitimate. According to Yusoff and Alhaji (2012), political theory brings the approach of developing voting support from shareholders, rather by purchasing voting power. Accordingly, having a political influence in corporate governance may direct corporate governance within the organization.…”

“…According to Yusoff and Alhaji (2012), the political model highlights the allocation of corporate power, profits and privileges that are determined via the governments' favour, and it can have an immense influence on governance developments. Political theory has also been referred to as public system.…”

Toward a comprehensive theoretical framework for Shariah governance in Islamic financial institutions

“…Stakeholder theory has been criticized for being single-valued (Jensen, 2001), deviating the firm from its goals by focusing on stakeholders (Ansoff, 1987) and creating competitive problems by flow of information to other working environments (Yusoff and Alhaji, 2012). In response to these arguments Roberts (1992) suggested that organizations prioritize their stakeholders based on their significance, power and dependence and formulate their strategy accordingly.…”

“…The wave of changes though was always moving between two extreme ends which are whether to view the firm as a mechanism to achieve its shareholder's objectives or to act as an advocate for a wider range of stakeholders. Merely adhering to one single theory to explain CG has proven to be inefficient hence it is suggested that a combination of various theories is best to describe effective and good governance practices (Turnbull, 2000;Dühnfort et al, 2008;Elena, 2012;Yusoff and Alhaji, 2012). Therefore in order to develop an integrated theoretical framework based on the preceding theories we must first integrate the key concepts identified in each theory and explain their relationship with concepts in other theories.…”