Corporate Governance Aims
Any corporate governance framework has at least 3 purposes:
- TRANSPARENCY: Board is telling what is going on
- ACCOUNTABILITY: Board is taking responsibility
- CORPORATE CONTROL: Ensure the Board is doing the right things
Corporate governance mechanisms and controls are designed to reduce the inefficiencies that arise from the moral hazard and manager's opportunistic behavior.
Some internal governance control mechanisms are: Ownership Concentration; Board of Directors representing the firm's ownership by monitoring strategic decisions; Enhancing the effectiveness of the Board by evaluating the performance of the Board; Executive Compensation - dealing with salary, bonuses longterm incentives to align key managers.
The overall focus should be on balancing the power of the board and the top management.