The Direction of Corporate Governance and Challenges--Lessons and Learning

Abstract

The key drivers of future direction of corporate governance principles, policies and practices have been discussed. The challenges involved in producing improved systems of governance have been evaluated. From literature reviewing, lessons and learning from case studies in companies have been explained, excepting governance systems, corporate culture, business ethic is important to good governance. Keywords-corporate governance; governance systems; Corporate culture; business ethnic I. CORPORATE GOVERNANCE AND THE PRINCIPLES Corporate governance is about using way such as processes, customs, policies, laws, and institutions to govern corporate entities[1]. Nowadays companies have increasingly discovered that traditional financial method is not sufficient to attract investors and what they need to do is to demonstrate conduct consistent with principles of good corporate governance.[2] The corporate governance codes of good practice has a close affinity with each other over world, because they learn from one another and gain experience through competition. Though their ways vary somewhat in detail, all emphasizes corporate transparency, accountability, reporting, and independence of governing body from management, and many now include strategic risk assessment and corporate social responsibility. [3] In these companies, Corporate Governance is on approach of convergence. While not codes looked same, as result of development stage, stage involvement, financial system (ownership patterns, financing, legal system, market for corporate control)[13], and cultural influence, models of corporate governance changes from one place to another. When some countries have a sound corporate governance, some places are busy with their problems. But what needed to get attention is none of models is perfect one. II. SITUATION AND CHALLENGE OF CHINESE AND AMERICAN COOPERATE GOVERNANCE US-Based Model can be a good example. The US model is also named as the unitary system, based on system of individual or institutional shareholders that are outsiders of corporation.[4] The management and board of directors are other sides of corporate governance triangle. The aim of this model is to separate control and ownership. As a consequence, almost every company has unitary board with independent outside directors. All of directors are elected by shareholders. In this case shareholders benefit can be protected. Unlike uk-commonwealth based Model, CEO can also be chairman. It is another reason why many companies include more outside directors now.[4] The company law based on common law and case law can be a supplement. US accounting and governance are rule based, regulator always asks it is legal or not. Ten years ago, US Model was famous for its trustworthy corporate regulation and reporting practices, while case of ENRON broke confident of investors. In 2002, Sarbans-Oxley Act was issued to change this situation, corporate managers have to work hard for shareholders to do their optimum use[5]. And it as respect helped restore trust in markets and improved investor confidence by using way accountability, speeding up reporting, and making more independent audits[6].That besides why corporate scandals can be considered as a key driver of change in governance systems: The Government and corporation have learned bitter lessons in this respect, carried pressure and query from pubic. To recover losses and wall up danger happened once more. They need to figure out correspondent countermeasures. However, US-Based Model is not invincible since it was covered from ENRON, global economic crisis destroyed thought that corporate governance system over world would converge on us-based. But economic crisis gives opportunity to super-economies such as India and China.Take China as an example, due to high GDP in following years, China escaped big impact and has learned a good lesson written in blood. Chinese Model, which government traditionally plays a strong role in governance system, led and managed by Chinese Communist Party, has to deal with problem such as accounting manipulation, interest conflicts, overinvestment, excessive CEO pay in a long time. It uses a two-tier model, but it relaxes inner control, and is lacking in supervision[13]. The benefit of minority shareholders is frequently damaged. Although situation is going against China, China is still keeping optimistic, a series of reforms are taking place and effective. If model is in Good scenario, China will have effective monitoring and have an improvement in International Conference on Global Economy, Commerce and Service Science (GECSS 2014) © 2014. The authors Published by Atlantis Press 379 transparency[7]. However, no matter Chinese model in what situation, because China is biggest developing country with a high increasing speed of economic growth , and it is important trading partners of many countries, its Corporate Governance will influence each other deeply. So is Indian. Therefore, super-economies could be a key driver of change in governance systems. III. TREND AND KEY FACTORS OF COOPERATE