Corporate Governance

The Choice Should there be a permanent base camp? KJ December 19th, 2011 Should there be a permanent base camp? The choice for a permanent base camp has not been made because the are plenty of good reasons why there should be one. On the other hand there are also plenty of bad reasons why there shouldn’t be one. Though the council has not decided completely there have been a few rumors that they might start building in 2014 or 2015. This may become an issue with the people that live in Nepal. The Argument The Good Things

The good things about this settlement is that everyone can have comfortable hot showers and a heating system to keep them warm. This is also good because there is a possibility that if it is built then it could lower the chances of polluting the area (more than it already is). That is if recycling bins and trash cans are added. The Bad Things Some of the bad things about the project is that it can cause more pollution instead of lowering the chances of it. The building if not stable enough could collapse because the base camp is a moving glacier.

Building this would cost more than $700,000 (not including the cost for electricity and supplies). That would make a sum of about $3,000,000 for when it is first built and and about $2,300,000 for all the supplies and electricity. That probably does not even include the cost of shipping. which would add about $50,000 every time a load of stuff is shipped there. The Problem The problem is that Mount Everest is a moving glacier with an altitude of 17598ft. Also this permanent camp could cause even more pollution than there already is.

This is also very costly considering that it is very far from any major towns and it takes several days of trekking to get there, so building a settlement will be difficult and expensive. Also the altitude makes living there very difficult, the people who work in the camp would have to go back to a lower altitude every week or so. Along with that operating and sustaining the camp would be extremely expensive, supplies would take very long to be delivered. The Solution The solution would be to find a way to make it less costly and more convenient for both the people that work there and the guests. The End Thanks for reading

I was surprised to learn about your passion to do good for other would be honored to fulfill your wish of Glenn away one million dollars. Through our discussions, you have made me realize there Is another America that people do not II eke to talk about. We talked about the meat packing plant, child labor, and women’s right s. After much thought, I have decided to give $600,000 to the meat packing plant, $300,000 to child labor, and $100,000 to women’s rights.

I have decided to give $600,000 to the meat packing plant. According to Document D, there was “meat that had tumbled out on the floor, in the dirt and said just, where the workers had tramped and spit” (Doc D). It also states that “thousands of RA TTS would race about” on the pile of dirty meat, and there would be “handfuls of the dried d dung of rats” (Doc D). This kind of disgusting work ethic had many people sick and dying.

To get rid of the rats, the packers would put “poisoned bread out for them”, an d hen after they would die, the dead rats, the poisoned bread, and the meat would all be pushed into the hoppers together (Doc D). It is disheartening that the workers of this industry did not care about this dirty contamination. These are Just some of the areas ones that I have made my decision to give the most amount of money to this Industry In hopes that they will make It Into a respectable operation. With this money, they wool be able to rebuild a new company making it more reliable and cleaner for the people.

Explain the similarities and differences between AT and TCE on corporate governance and criticize AT using TCE’s perspective Both AT and TCE share considerably the same assumption, they believe that market mechanism will not work all the time because of bounded rationality, opportunism, and moral hazard. The two theories also believe that there is no perfect contract and both rely endogenously on the board of director as a control instrument.

Even though AT and TCE both share these similarities, they analyze them from different perspectives. The unit of analysis in AT is individual level, while it is transaction in TCE. The focal cost of AT is the residual loss that causes from bounded rationality, opportunism, and moral hazard, while it is maladaptation of governance structure in TCE. Furthermore, the focal contractual concern of AT is ex ante, while it is ex post in TCE. AT focuses on relationship between principals (shareholders) and agents (CEO).

Due to the fact that the principals want to maximize their return, while the agents want to maximize their wealth, power, and prestige, so the interests of the two parties are not aligned. The agents are able to fulfill their interests without necessary fulfilling the principals’. To guard against such bounded rationality, opportunism, and moral hazard from the agent, board of director is appointed to link the imperfect relationship between principals and agents. The board of director has the right to monitor, ramify, and sanction the decision of the agent to fiduciary protect the principals’ interest.

Apart from appointing the board of director, nexus of contracts is utilized to provide ex ante incentive alignment and minimize inefficiencies in the contractual structure of the firm that arise form the unaligned interests. TCE focuses on the alignment of the governance structure in order to minimize the transaction cost as much as possible. Its focal contractual concern is ex post governance structure so they strive to reduce the transactions cost by integration rather than focusing on incentives. TCE also assume bounded rationality, opportunism, and moral hazard as AT, but TCE focuses on transaction level instead of individual level.

Apart from the assumptions of bounded rationality, opportunism, and moral hazard, two variables must be concerned in order to decide the appropriate governance structure. These variables are namely uncertainty, and asset specificity. The level of uncertainty is dependant on the length of the transaction and often is a part of bounded rationality. Longer length of transaction often leads to higher uncertainty. Asset specificity, contrary to uncertainty, is better for longer length of transaction. This is due to the reason that, the transactions cost is lower in a higher specific asset.

If the level of asset specificity and uncertainty are high in both parties, vertical integration is suitable in minimizing the transactions cost, but if the level of uncertainty is low while the asset specificity is high in both parties, long term contract is more suitable. Board of director also exists in TCE, but for different purpose than in AT. The role of the board of director in TCE is to safeguard the firm against financial lost from by financially look after the firm rather than monitoring the agents’ behavior.

Corporate Governance Issues in Nepali private companies This is why private equity investors are very skeptical while investing in frontier market like Nepal…… This article has spot-on identified issues related to corporate hygiene. “The first gaping imbalance in the emerging markets private equity equation was the accuracy timeliness, and transparency of financial and operating information provided to investors, and the willingness of managers to subject themselves to some degree of accountability to outsiders.

Even in the best of circumstances, relationships between investors and the managers of their portfolio companies are complex and often contentious, but the absence of sound corporate governance practice has sharply accentuated that tension. Nowhere does this issue become more problematic than with family owned firms. Although widespread in all countries, family ownership tends to be even more prevalent in developing countries. The prototype is an entrepreneur who has built a successful business with virtually no capital or shareholders beyond his or her immediate family and close friends.

Absent any accountability to outside shareholders, the interests of the owner and the firm are indistinguishable, and financial accounts are frequently intermingled. These traditions of autonomy, secrecy, and independence run deep within the corporate culture of most developing country firms, rarely challenged until the need for outside capital becomes imperative. Few entrepreneurs, for example, have ever undergone an independent audit or adhered to international accounting standards that are the prerequisites for virtually every professional investor.

The prospective investor is thus at the mercy of the entrepreneur for access to information necessary to make critical judgments about company performance and value. The common practice, for example, of maintaining two or even three sets of accounting records in order to avoid the tax collector frustrates the due diligence team’s task of gaining an accurate picture of performance. Opaque bookkeeping and disclosure habits also may impede access to other important information that might alter investor perceptions of company value, such as environmental liabilities or unresolved legal disputes. Read about Corporate Governance at Wipro

As one investor noted, “One big problem is skeletons in the closet. Many of these great companies have hidden subsidiaries, offshore sales and other tax avoidance schemes. ” Nor is the lure of badly needed capital likely to overcome resistance to outside investors who are inclined to push and prod management to make painful changes they believe are needed to increase transparency and enhance company value. It is not surprising, there”.

What is corporate governance? Contemporary corporate governance started in 1992 with the Cadbury report in the UK Cadbury was the result of several high profile company collapses is concerned primarily with protecting weak and widely dispersed shareholders. Corporate Governance is a mechanism through which boards and directors are able to direct, monitor and supervise the conduct and operation of the corporation and its management in a manner that ensures appropriate levels of authority, accountability, stewardship, leadership, direction and control.

“Corporate governance is concerned with holding the balance between economic and social goals and between individual and communal goals. The importance of corporate governance lies in its contribution both to business prosperity and to accountability.

What is corruption? Corruption is wrong doing on the part of an authority and powerful party through means that are illegitimate, immoral or incompatible with ethical standards. Corruption often from protonage and is associate with bribery

Types of corruption

The types of corruption are as follows:

1. Bribery
2. Theft and fraud
3. Extortion
4. Abuse of discretion
5. Favouritism, nepotism and clientism
6. Conduct creating or exploiting conflicting interest
7. Improper political contribution.

• What is corporate governance?

Contemporary corporate governance started in 1992 with the Cadbury report in the UK Cadbury was the result of several high profile company collapses is concerned primarily with protecting weak and widely

dispersed shareholders. Corporate Governance is a mechanism through which boards and directors are able to direct, monitor and supervise the conduct and operation of the corporation and its management in a manner that ensures appropriate levels of authority, accountability, stewardship, leadership, direction and control. “Corporate governance is concerned with holding the balance between economic and social goals and between individual and communal goals.

The importance of corporate governance lies in its contribution both to business prosperity and to accountability.

• What is corruption? Corruption is wrong doing on the part of an authority and powerful party through means that are illegitimate, immoral or incompatible with ethical standards. Corruption often from protonage and is associate with bribery
• Types of corruption

The types of corruption are as follows:

1. Bribery
2. Theft and fraud
3. Extortion
4. Abuse of discretion
5. Favouritism, nepotism and clientism
6. Conduct creating or exploiting conflicting interest
7. Improper political contribution.

• What is corporate governance?

Contemporary corporate governance started in 1992 with the Cadbury report in the UK Cadbury was the result of several high profile company collapses is concerned primarily with protecting weak and widely dispersed shareholders. Corporate Governance is a mechanism through which boards and directors areable to direct, monitor and supervise the conduct and operation of the corporation and its management in a manner that ensures appropriate levels of authority, accountability, stewardship, leadership, direction and control. “Corporate governance is concerned with holding the balance between economic and social goals and between individual and communal goals. The importance of corporate governance lies in its contribution both to business prosperity and to accountability.

• What is corruption?

Corruption is wrong doing on the part of an authority and powerful party through means that are illegitimate, immoral or incompatible with ethical standards. Corruption often from protonage and is associate with bribery

• Types of corruption The types of corruption are as follows:

1. Bribery
2. Theft and fraud
3. Extortion
4. Abuse of discretion
5. Favouritism, nepotism and clientism 6)Conduct creating or exploiting conflicting interest 7)Improper political contribution.

• What is corporate governance?

Contemporary corporate governance started in 1992 with the Cadbury report in the UK Cadbury was the result of several high profile company collapses is concerned primarily with protecting weak and widely dispersed shareholders. Corporate Governance is a mechanism through which boards and directors are able to direct, monitor and supervise the conduct and operation of the corporation and its management in a manner that ensures appropriate levels of authority, accountability, stewardship, leadership, direction and control.

“Corporate governance is concerned with holding the balance between economic and social goals and between individual and communal goals. The importance of corporate governance lies in its contribution both to business prosperity and to accountability.

• What is corruption?

Corruption is wrong doing on the part of an authority and powerful party through means that are illegitimate, immoral or incompatible with ethical standards. Corruption often from protonage and is associate with bribery

• Types of corruption

The types of corruption are as follows:

1. Bribery
2. Theft and fraud
3. Extortion
4. Abuse of discretion
5. Favouritism, nepotism and clientism
6. Conduct creating or exploiting conflicting interest
7. Improper political contribution.

• What is corporate governance?

Contemporary corporate governance started in 1992 with the Cadbury report in the UK Cadbury was the result of several high profile company collapses is concerned primarily with protecting weak and widely dispersed shareholders.

Corporate Governance is a mechanism through which boards and directors are able to direct, monitor and supervise the conduct and operation of the corporation and its management in a manner that ensures appropriate levels of authority, accountability, stewardship, leadership, direction and control. “Corporate governance is concerned with holding the balance between economic and social goals and between individual and communal goals. The importance of corporate governance lies in its contribution both to business prosperity and to accountability.

• What is corruption?

Corruption is wrong doing on the part of an authority and powerful party through means that are illegitimate, immoral or incompatible with ethical standards. Corruption often from protonage and is associate with bribery

• Types of corruption The types of corruption are as follows:

1. Bribery
2. Theft and fraud
3. Extortion
4. Abuse of discretion
5. Favouritism, nepotism and clientism
6. Conduct creating or exploiting conflicting interest
7. Improper political contribution.

• What is corporate governance?

Contemporary corporate governance started in 1992 with the Cadbury report in the UK Cadbury was the result of several high profile company collapses is concerned primarily with protecting weak and widely dispersed shareholders. Corporate Governance is a mechanism through which boards and directors are able to direct, monitor and supervise the conduct and operation of the corporation and its management in a manner that ensures appropriate levels of authority, accountability, stewardship, leadership, direction and control.

“Corporate governance is concerned with holding the balance between economic and social goals and between individual and communal goals. The importance of corporate governance lies in its contribution both to business prosperity and to accountability.

• What is corruption?

Corruption is wrong doing on the part of an authority and powerful party through means that are illegitimate, immoral or incompatible with ethical standards. Corruption often from protonage and is associate with bribery

This time period was selected based on the ease of availability of data for the variables. BRIEF SUMMARY: Corporate governance measures like board structure, compensation structure and ownership structure are determined by one another, and by variables such as risk, cash flows, firms’ size and regulations etc. Firm risk has a role to play in firm performance, because firms that take more risk generally have higher returns. Firms that engage in risky projects are expected to yield better returns that those which lack the appetite to take asks.

However, excessive risk taking may prove to be fatal for a firm Family Ownership and Firm Risk – studies the impact of corporate governance (through family control, bank control and ownership concentration) on risk taking of Japanese firms. Bank Ownership and Firm Risk – Banks are expected to have low risk-taking preferences and are most likely to avoid risky ventures. Ownership Structure and Firm Risk – Managerial ownership plays a significant role in firm’s risk-taking.

Lesser ownership in this regard may hold back the managers to indulge in risky projects. Board Independence and Firm Risk – Structuring of a firm’s board of directors also plays a crucial role in reducing the agency costs. Therefore, the role Of the executive board’s structure is also crucial for the firm’s value. Non-executive directors on the board of directors, acting on the part of external shareholders, are generally expected to monitor firm’ s strategy and decision-making in this regard.

CRITIQUE: The study on corporate governance has received considerable attention in the past decade or so due to the significant role of corporate governance in enhancing the firms’ performance. This research has investigated the impact f various corporate governance measures have been on firm performance and firm value. This study can also contribute to the corporate world by incorporate a vast range of corporate governance variables in the analysis, including bank ownership, family ownership, managerial ownership and board independence.

Corporate governance deals with the ways in which a firm protects the interests of its investors, lenders, and creditors. It’s the process and structures used to direct and manage business affairs of the company towards enhancing prosperity and corporate accounting with the ultimate objective of realizing shareholders long-term value while taking into account the interests of other stakeholders i. e. management, customers, financiers, government, employees and the general community. (Shleifer A,Vishny R. , 1986)

Corporate governance clearly elaborates explicit and implicit contracts between the stakeholders and the entire firm for sharing of obligations, rights, and rewards, it also highlights ways of resolving conflicting interests among stakeholders arising out of their roles and privileges. It enhances adequate supervision, enforcing strong internal control systems, and facilitating adequate information-flows to serve as a system of checks-and-balances. It ensures accountability of interested party in an organization through mechanisms that reduce or to some extent eliminate principal-agent problems.

Contracts in reality are typically incomplete. Bounded foresight or transactions costs prevent the contracts that are written from providing for all possible future contingencies. In addition, the courts may be unable or unwilling to enforce some contracts. And even if they do enforce them, the parties themselves may want to renegotiate them given rise to elements of contract incompleteness (Shleifer, A. , Vishny, R. , 1997). The allocation of control rights between the parties concerned is of major importance and ends up bringing a lot of problems in running of many enterprises.

Firms are organized on the ground of contracts to reduce transaction costs arising from the rationality of humans. The managers and others who enter into contracts also are boundedly rational, which makes all contracts incomplete. For external finance contracts, corporate governance is a remedy for reducing transaction costs arising from incomplete governance arrangements of such contracts. Three components of corporate governance established by firms include voluntary disclosure, internal corporate governance and external corporate governance. (Agrawal A and Knoeber C, 1996)

An agency relationship arises where one or more parties called the principal contracts/hires another called an agent to perform on his behalf some services and then delegates decision making authority to that hired party (Agent). In the field of finance shareholders are the owners of the firm. However, they cannot manage the firm because: • They may be too many to run a single firm. • They may not have technical skills and expertise to run the firm. • They are geographically dispersed and may not have time. Shareholders therefore employ managers who will act on their behalf.

The managers are therefore agents while shareholders are principal. Shareholders contribute capital which is given to the directors which they utilize and at the end of each accounting year render an explanation at the annual general meeting of how the financial resources were utilized. This is called stewardship accounting. In the light of the above shareholders are the principal while the management are the agents. Agency problem arises due to the divergence or divorce of interest between the principal and the agent. The conflict of interest between management and shareholders is referred to as agency problems.

(Shleifer, A. ,Vishny,R. ,1997) For shareholders and management, there is near separation of ownership . Owners employ professionals (managers) who have technical skills. Some problems arising due to the above relationship are; managers might take actions, which are not in the best interest of shareholders. This is usually so when managers are not part of the owners of the firm i. e. they don’t have any shareholding. The actions of the managers will be in conflict with the interest of the owners. Agency problems in the above can be due to the followings;

Incentive Problem Managers may have fixed salary and they may have no incentive to work hard and maximize shareholders wealth. This is because irrespective of the profits they make, their reward is fixed. They will therefore maximize leisure and work less which is against the interest of the shareholders. • Consumption of “Perquisites” Prerequisites refer to the high salaries and generous fringe benefits which the directors might award to themselves. This will constitute directors remuneration which will reduce the dividends paid out to the ordinary shareholders.

Therefore the consumption of perquisites is against the interest of shareholders since it reduces their wealth. • Different Risk-profile Shareholders will usually prefer high-risk-high return investments since they are diversified i. e. they have many investments and the collapse of one firm may have insignificant effects on their overall wealth. Managers on the other hand, will prefer low risk-low return investment since they have a personal fear of losing their jobs if the projects collapse. (Human capital is not diversifiable).

This difference in risk profile is a source of conflict of interest since shareholders will forego some profits when low-return projects are undertaken. • Different Evaluation Horizons Managers might undertake projects which are profitable in short-run. Shareholders on the other hand evaluate investments in long-run horizon which is consistent with the going concern aspect of the firm. The conflict will therefore occur where management pursue short-term profitability while shareholders prefer long term profitability. • Management Buy Out (MBO) The board of directors may attempt to acquire the business of the principal.

This is equivalent to the agent buying the firm which belongs to the shareholders. This is inconsistent with the agency relationship and contract between the shareholders and the managers. Pursuing power and self esteem goals This is called “empire building” to enlarge the firm through mergers and acquisitions hence increase in the rewards of managers. • Creative Accounting This involves the use of accounting policies to report high profits e. g. stock valuation methods, depreciation methods recognizing profits immediately in long term construction contracts etc.

Corporate governance reform around the world revolves around the principles employed by the U. S. or UK models of corporate governance such as adequate management compensation shareholder rights, disclosure and transparency, and the use of independent directors who are independent. Corporate governance reform raises some specific challenges for countries like Japan and Germany, which are trying to adapt their models of bank-based or stakeholder corporate governance to a changing international environment. (Dunfee T. , et al, 2001).

In Japan and Germany, the engagement of management has been based on incremental and negotiated term of adjustment based on performance levels. In Germany, shareholders value is associated with performance based pay schemes associating salaries to business or individual performance. Although performance pay has not replaced existing pay schemes, it represents a major decentralization of collective bargaining. In Japan, the lifetime employment system is basically stable, but the system of seniority-based pay is undergoing modifications and merit-based pay is being introduced.

The US model of managerial capitalism was characterized by a wide dispersion of share ownership and the separation of ownership and control, and German and Japanese models of internal control was geared toward protecting managers to a greater degree than the US model. After the stock market crash of March 2000, US model of managerial capitalism changed toward corporate governance centered on the maximization of shareholder value. Many shareholders never come together and have limited knowledge and understanding of company’s business.

Entities may stop paying dividends and investors don’t care. They are most of the time unaware when executives squander vast amounts of corporate money. Investors living under ‘democratic capitalism’ are faced with many barriers to control their company’s management hence worsening the already volatile agency relationship. Managers as agents of shareholders (principals) can engage in self-serving behavior that may be inconsistent with shareholders’ wealth maximization principle.

To put in check managerial opportunism, members may use different and diverse range of corporate governance mechanisms, which include monitoring by boards of directors and mutual monitoring by managers as well as monitoring by large outside shareholders . In addition, internal governance mechanisms may include various equity-based managerial incentives that align interest of agents and principals. Finally, the external factors, such as the threat of takeover. If the shares of the firm are undervalued due to poor performance and mismanagement, Shareholders can threatened to sell their shares to competitors.

In this case the management team is fired and those who stay on can loose their control and influence in the new firm. This threat is adequate to give incentive to management to avoid conflict of interest. (Cowan R. , et al 2000) . Williamson O. E suggested that a combination of internal and external governance mechanisms may reduce principal-agent costs and align interests of principals and agents. Within this theoretical framework, emphasis has been placed on the monitoring and control dimensions of governance. Indeed the Cadbury Report’s terms of reference were specifically restricted to financial or accountability aspects.

Both policy and research attention has thus been focused on the roles of non-executive directors and the functioning of boards, disclosure practices, companies relationships with auditors, executive remuneration issues and the roles of institutional investors (Short et al. , 1999). Corporate governance is both about ensuring accountability of management in order to minimize downside risks to shareholders and about enabling management to exercise enterprise in order to enable shareholders to benefit from the upside potential of firms (Keasey and Wright, 1993; Tricker, 1984).

This distinction has sometimes been referred to as the wealth-creating and wealth-protecting aspects of corporate governance. Other ways of resolving the conflicts between shareholders and management include; Pegging/attaching managerial compensation to performance This will involve restructuring the remuneration scheme of the firm in order to enhance the alignments/harmonization of the interest of the shareholders with those of the management e. g. managers may be given commissions, bonus etc. for superior performance of the firm. (Dunfee T. W. et al, 2001)

Threat of firing – This is where there is a possibility of firing the entire management team by the shareholders due to poor performance. Management of companies has been fired by the shareholders who have the right to hire and fire the top executive officers. Direct Intervention by the Shareholders Shareholders may intervene by insisting on a more independent board of directors. By sponsoring a proposal to be voted at the AGM making recommendations to the management on how the firm should be run. Managers should have voluntary code of practice, which would guide them in the performance of their duties.

Executive Share Options Plans In a share option scheme, management can be given a number of share options, each of which gives the holder the right after a certain date to subscribe for shares in the company at a fixed price. The value of an option will increase if the company is successful and its share price goes up. The theory assumes that this will encourage managers to pursue high NPV strategies and investments, as shareholders will benefit personally from the increase in the share price that results from such investments.

Incurring Agency Costs- these are incurred by the shareholders in order to monitor the activities of their agent. They include contracting costs incurred in devising the contract between the managers and shareholders. The contract is drawn to ensure management act in the best interest of shareholders and the shareholders on the other hand undertake to compensate the management for their effort. Such cost may be negotiation fees, legal costs of drawing the contracts fees or the costs of setting the performance standard, other agency costs are monitoring Costs e. g. audit fees legal compliance expenses e.

g. Preparation of financial statement according to international accounting standards, company law, capital market authority requirement, stock exchange regulations etc. Ensure that only competent and reliable persons who can add value are elected or appointed to the board of directors (BOD). Ensure that the BOD is constantly held accountable and responsible for the efficient and effective governance of the corporation so as to achieve corporate objective, prospering and sustainability. Change the composition of the BOD that does not perform to expectation or in accordance with mandate of the corporation

Leadership-Every corporation should be headed by an effective BOD, which should exercise leadership, enterprise, integrity and judgments in directing the corporation so as to achieve continuing prosperity and to act in the best interest of the enterprise in a manner based on transparency, accountability and responsibility. Appointments to the BOD-It should be through a well managed and effective process to ensure that a balanced mix of proficient individuals is made and that each director appointed is able to add value and bring independent judgment on the decision making process.

Strategy and Values-The BOD should determine the purpose and values of the corporation, determine strategy to achieve that purpose and implement its values in order to ensure that the corporation survives and thrives and that procedures and values that protect the assets and reputation of the corporation are put in place. Structure and organization-The BOD should ensure that a proper management structure is in place and make sure that the structure functions to maintain corporate integrity, reputation and responsibility.

Corporate Performance, Viability & Financial Sustainability. The BOD should monitor and evaluate the implementation of strategies, policies and management performance criteria and the plans of the organization. In addition, the BOD should constantly revise the viability and financial sustainability of the enterprise and must do so at least once in a year. Corporate compliance-The BOD should ensure that corporation complies with all relevant laws, regulations, governance practices, accounting and auditing standards.

Corporate Communication-The BOD should ensure that corporation communicates with all its stakeholders effectively. Accountability to Members-The BOD should serve legitimately all members and account to them fully. Responsibility to stakeholders-The BOD should identify the firm’s internal and external stakeholders and agree on a policy (ies) determining how the firm should relate to and with them, increasing wealth, jobs and sustainability of a financially sound corporation while ensuring that the rights of the stakeholders are respected, recognized and protected.

(Jensen, M. C. & W. H. Meckling, 1976) REFERNCES Dunfee T. W. , Warren, A. E. Is Guanxi Ethical, 2001: a normative analysis of doing business in China Journal of business ethics, 32, 191-204 Cowan R. , P. A. David & D. Foray, 2000. The explicit economics of codification and tacitness. Industrial and corporate change, 9(2): 211-254 Dewatripont, Mathias and Jean Tirole. A Theory of Debt and Equity: Diversity of Securities and Manager-Shareholder Congruence. The Quarterly Journal of Economics,1994, CIX: 1027- 1054.

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Williamson O. E, 1996. The mechanism of governance. Oxford University Press, Oxford Agrawal A and Knoeber C (1996), Firm performance and mechanisms to control agency problems between managers and shareholders, Journal of Financial and Quantitative Analysis, 31, 377-95. Ang J, Cole R and Lin J. 2000, Agency costs and ownership structure, Journal of Finance, 55:1, 81-106. Cornelius P and Kogut B (2003), Corporate Governance and Capital Flows in a Global Economy, Oxford University Press, Oxford.