Insight of Corporate Governance Theories

Abstract

The progression of theories or models of corporate governance, it is one of the new dimensions taken in a very crux of social ethics that is minimal and profit making took center stage. In this competitive world, companies are trying to inculcate the wisdom of good governance into their corporate organization. With the massive outpouring of capitalism, companies became stronger while governments around the globe had to accede to its influences and supremacy. However, this paper is a review of literature on the variety of theories in corporate governance. The ultimate theories in corporate governance started with the agency theory, extended into stewardship theory and stakeholder theory and evolved to resource dependency theory, political theory, legitimacy theory and social contract theory. However, these theories discourse the cause and consequence of variables, such as the formation of board structure, audit committee, independent non-executive directors and the duties of upper management and their organizational and social responsibilities rather than its regulatory structures. Similarly, it is proposed that a mixture of various theories is best to describe an effective and efficient good governance practice rather than hypothesizing corporate governance based on a sole theory.