Chapter 1

Introduction

Corporate governance (CG) is an important effort to ensure accountability and responsibility and is a set of principles, which should be incorporated into every part of the organization.

The need for corporate governance arises from the potential conflicts of interest among stakeholders in the corporate structure. These conflicts of interest often arise from two main reasons. First, different stakeholders have different goals and preferences. Second, the stakeholders have imperfect information as to each others actions, knowledge, and preferences. Corporate governance (CG) is an important effort to ensure accountability andresponsibility and is a set of principles, which should be incorporated into every part ofthe organization. Though it is viewed as a recent issue, there is, in fact, nothing newabout the concept. Because it has been in existence as long as the corporation itself-aslong as there has been large – scale trade, reflecting the need for responsibility in thehandling money and the conduct of commercial activities.

Chapter 2

Literature review

2.1 What is Corporate Governance?

Different authors view the meaning of corporate governance differently. For example, one school of thought describe corporate governance as a “system” by which companies are directed and controlled (Cadbury and Greenbury Report, CFACG 1992); another school views corporate governance as “structures and processes for decision making, accountability, control and behavior at the governing body” (Public accounts and Estimates Committee, 2002); to others corporate governance is about “finding ways” to ensure effective decision making (Pound 1995). But it must be kept in our mind that the fundamental concern of corporate governance is to ensure the conditions whereby a firm’s directors and mangers are held accountable, ensure better and effective protection to