Abstract
Corporate governance (CG) has emerged as one of the most recognized areas for researchers, academics, practitioner, and regulators over the last few decades. This paper will initially present an epigrammatic overview on key developments in corporate governance along with the intellectual foundations of the ‘shareholder versus stakeholder’ argument. Additionally, this study tries to analyze the contemporary shift in the perception of corporations from the shareholders wealth maximization to stakeholder’s valuation. It has been noticed that investigating cross country and firm based variances in wealth distribution between diverse interest groups is likely to continue as major focus for CG study. It has been experienced that the nature of the corporation is changing around the globe, Big multinationals have been splitting into smaller liberated corporation, access to capital market is become easier and physical resources are easily replaceable and less exclusive to business strategy therefore the human resources turn into significantly important means to a corporation’s existence and growth. In addition to that firm’s relationships with community and goodwill are becoming equally crucial. In line with that, the implementation of corporate governance principle in every country can be vary because of their different cultural, existing legal system, environmental condition, social and historical values. In addition to the principle differences regarding the interests of the parties served, the two orientations of corporate governance also differ in terms of purpose. This means that the corporate governance evolution will be progressive and different according to individual countries. Furthermore, from a systems-based viewpoint, recent progresses are often viewed as a “mixture” of domestic CG framework. Fundamental features from stakeholder leaned system are reframed with latest aspects of equity-holder leaned models, such as comprehensibility and precision. Shareholder and stakeholder focused CG, might help to create an equilibrium or complement each other such as happening in Germany and Japan. Global standards are also playing a major role in the recent convergence of CG.
Highlights
Corporate governance is a system designed to improve corporate performance through supervision of management performance to ensure accountability to stakeholders based on regulatory framework
The convergence point between the prominent shareholder model adopted by Americans and the extreme stakeholder model advocated by Europeans, may be in the sense of "socially-responsible corporate governance," a concept that seeks to unite two important themes that have not been incorporated so far: good corporate governance and corporate social responsibility (Bottenberg et al(2017), and each model tends to converge because corporate governance practices continue to grow
This paper reviews the research by Forbes et al(2013) mentioned that there is a shift in emphasis, both theory and practice, from the shareholder-dominated approach to a stakeholder-oriented approach to a corporate governance
Summary
Corporate governance is a system designed to improve corporate performance through supervision of management performance to ensure accountability to stakeholders based on regulatory framework. An attention to the importance of corporate governance increased after the big scandals that occurred in the U.K and the U.S companies, in the 1980s. The theoretical discussion of corporate governance system is still dominated by a debate between shareholder approach and stakeholder approach (Bottenberg et al.,2017). Maximizing shareholder wealth has become a dominant corporate focus and goal (Lazonick & O'Sullivan, 2000) In recent time, this view has been challenged by the growing of stakeholder theory, assert that the company interacts with shareholders, and other stakeholders, such as employees, consumers, creditors, and surrounding communities, where they have own respective roles in corporate governance systems (Smith (2003); Pfarrer (2010)). This paper will primarily criticize the suggestion mentioned by Forbes, et al,(2013) that there is a dramatic shift in emphasis in Corporate Governance from a shareholder-dominated approach to
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