Unit 5: Concepts of Corporate Governance and Corporate Social Responsibility
5.1 Corporate Governance: A Conceptual Perspective
Corporate governance = the system by which companies are directed and controlled (the Cadbury definition’s family — the board’s-and-shareholders’-and-stakeholders’ architecture of Units 1–4 given its theory-name): the who-decides, for-whom, checked-by-whom of the corporate person. The concept’s layers: the agency-relationship’s management (the directors-shareholders’-and-managers’ chains), the accountability’s machinery (the disclosure-and-audit-and-meeting faces), the fairness-and-transparency’s norms (the stakeholders’ treatment), and the responsibility’s face (the law’s-and-the society’s compliance). The concept’s core question: whose company is it? — the shareholder-vs-stakeholder debate (1.14’s Dodge-vs-modern-formula war).
5.2 Corporate Governance: A Theoretical Perspective
The theories’ menu (the exam’s one-line-each): (1) agency theory (Jensen-and-Meckling’s name: the principal-agent’s costs-and-monitoring — the governance-as-contracting); (2) stewardship theory (the directors-as-trusted-stewards — the trust’s-and-intrinsic-motivation’s model); (3) stakeholder theory (Freeman’s name: the multiple-principals’ balancing — the company as the stakeholders’ coalition); (4) transaction-cost theory (the governance-as-the-economics’ economising); (5) resource-dependence theory (the board as the environment’s bridge — the directors’ networks-and-resources); (6) shareholder-vs-stakeholder primacy (1.14’s normative war given theory’s dress); (7) managerial-hegemony’s pessimism (the board-as-legal-fiction’s critique) — and the theories’ synthesis: the governance as the agency’s problem-solving under the fairness’s constraint.
5.3 Objectives of Corporate Governance System
The system’s purposes (the exam’s list): (1) the investors’-and-creditors’ confidence (the capital’s attraction-and-cost — the “well-governed is cheaply-financed” thesis); (2) the accountability’s discipline (the power’s answer to the owners-and-law); (3) the minority’s-and-stakeholders’ fairness
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