How Corporate Governance And The Breakdown Of Each Sector...

Introduction Corporate Governance is the system of rules, practices and processes in which a company is controlled and directed. â€Å"It essentially involves balancing the interests of the many stakeholders in the company.† (Investopedia). These can include shareholders, management, customers, suppliers, financiers, government and the community depending on the type of company. It provides the framework for attaining any company’s objectives. As western culture transitions into a more globalized economy, a set of standards enhancing corporate character should be evaluated. These standards are created within an organization to add long term value for the shareholders, and should be managed on a regular basis to achieve desired goals that†¦show more content†¦This resulted in a wide variation in governance across U.S. firms. Firms with weaker shareholder rights earned lower returns, had poorer operating performance and were valued lower overall. Multinational corporations used a number of methods to ensure their foreign subsidiary managers owned shares of their firm to align their interests with those of the corporation. These managers were also offered bonuses in the form of stock that they were unable to sell for a few years to encourage them to focus on the goal of maximization of the stock price when making decisions for the subsidiaries. Stock ownership for upper level management is limited, thus resulting in the decision to protect their jobs even if it reduces the stock price. An example of this would be a manager deciding to expand their subsidiary in order to justify their position, even if it affects the values of the corporation overall. Governance is to ensure that managerial decisions serve the shareholder’s interests. United States and Corporate Governance During the Reagan administration, neo-liberalism also known as neo-classical economics allowed for a political alley, crucial for marketing business to business regulation that remained for the public sector and is communicated by a set of policies and standards called Corporate Governance, (Citation; YR). The neo-classical approach was created from a capitalistic