Corporate Governance: The Catalyst for Economic Growth and Social Change

Corporate Governance: The Catalyst for Economic Growth and Social Change

Sandeep Goel (Management Development Institute, India)
DOI: 10.4018/978-1-4666-7470-7.ch001

Abstract

In light of the increasing number of corporate frauds worldwide, there is a growing emphasis on corporate governance. These corporate misappropriations not only destroy shareholder value but also act as a detriment to economic growth and social change. Therefore, investors look for companies with better corporate governance to maximize their returns. Still, this aspect of corporate governance has been largely neglected in the existing studies. This chapter is therefore an attempt to address corporate governance and its effect on business performance in the context of economic growth and social transformation at the global level. It goes inside the black box of the financial matrix. The central issue that emerges is the criticality of key parameters in the corporate governance process for organisational performance. It is hoped that it will provide a new dimension to the existing body of corporate governance for global development with policy implications for the required growth and social change.
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Background

Corporate governance has been associated with the “Agency conflict”, i.e. principal-agent problem. As principal, shareholders expect the agents (managers) of the company to act in their best interest but in practice the situation is opposite. This gap leads to mis-governance (Berle & Means, 1932). For the last two decades, corporate governance has been an area of focus for all the economies globally on account of its increasing importance for economic growth and social transformation. Corporate are giving due importance to it regardless of whether they are involved in global operations or not.

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