The Role of Non-Executive Directors for the Best Work of Corporation Essay

The Role of Non-Executive Directors for the Best Work of Corporation - Essay ExampleThis paper illustrates that collective governance is mainly concentrated on the problem of a safety mechanism which ensures the interests of sh arholders and the interests of the directors managing the company are aligned and observed. In fact, it deals with the ways in which suppliers of finance to the corporations assure themselves of getting a return on their investment. The governance problem arises when managers or directors interests of maximizing their own wealth, power and prestige and shareholders interests of increasing the value shareholders uprightness collide. This misalignment of interests was addressed by the agency theory developed in the West. The theory assumes that interests of managers and principles or owners are non aligned because of the separation of ownership and control and the only mechanism to safeguard shareholders interests is to utilise appropriate governance structu res. The agency problem in the United States and the United Kingdom is between the counsel/board and outside diverse shareholders while in continental Europe and Japan and East Asiatic markets with their concentrated ownership structure the main conflict is between the major owners/directors and minority shareholders. Corporate scandals such(prenominal) as notorious Enron, Tyco, WorldCom, Polly Peck, HIH Insurance, and OneTel suggested the need for changes in corporate governance regulations all over the world. As rely towards company insiders as well as to auditors, analysts or regulators was shattered, governments started to think over regulations which would prevent such raw practices. As the board of directors represents the interests of shareholders and controlssupervises the management, its effective functioning is a strong corporate governance mechanism.