Approaches to Corporate Governance
August 31st, 2010 | 
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This article part of Business Ethics in the World Corporate Governance
Over the years, two very different approaches to corporate governance have emerged. One is the mixing of the organization of control of perspective and the perspective of the parties, the control and the other is based on the control of the capital market.
The first approach short-term approach sacrifices on the altar of long-term sustainability. It is based on one person one vote phrase. The agreed target for management is to achieve stability and permanence of the business . Board representing the workers and society. major chunk of equity comes from financial and nonfinancial companies that are willing to wait longer periods for their investments to bear fruit. Companies are not too interested in going public with it do not lend themselves to the whims and fancies of the market. welfare of workers, the obligation of the local community, the size and market share are the essence of this approach. Myopic market model by Marris is the cornerstone of this approach. In this model, ignoring the market too has a detrimental effect on the organization.
The excesses of this approach are created by the executive managerial capitalism is given a free hand in managing the program. Sometimes a series of goals other than wealth creation will follow.
As the company expands, we need additional capital. If equity is derived from stable sources such as banks, then the company has no choice but to go public. This results in capital market control system. It is based on a share of that vote in January. The more the capital held by an investor, the more the company is at their mercy. Investors are interested in the extremes, dividends and capital gains. Therefore, companies must fight for the mind space of these players. This means that in the short term this approach. This perspective is based on the principal agent model. Line crosses in this approach, when investor capitalism sets in all the other obligations of the company are relegated to keeping the share price and there is intense pressure on executives to perform consistently in the short term has often led to violation of the rules.
Both approaches are similar in so far as both give minority shareholders a little attention. They have been taken for granted most of their rights have remained on paper.
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