Corporate Governance: Frameworks

In this essay we have discussed the broad spectrum of definitions of corporate governance that exist in the literature, ranging from a narrow, agency theory definition to broader, stakeholder-oriented definitions. The definition for the purposes of this essay adopts a stakeholder-oriented approach to corporate governance and does not necessarily contradict an agency theory approach. The essay has also outlined three theoretical frameworks used for discussing and analyzing corporate governance and has examined the extent to which they overlap. Having outlined some theoretical issues in corporate governance, we now turn to a discussion of the practical agenda for corporate governance reform. Our first task is to look at what happens when corporate governance fails, as in the cases of Enron and Parmalat. These cases clearly demonstrate a need for corporate governance reform. The next task is to examine the ways in which corporate governance may be improved by targeting a range of mechanisms, checks and balances.