Corporate governance is the structure of rules, practices, and
processes used to direct and manage a company. The board of
directors is the foremost force influencing corporate governance.
Corporate governance covers the areas of environmental awareness,
ethical behavior, corporate strategy, compensation, and risk
management with the basic principles being accountability,
transparency, fairness, responsibility, and risk management. The
stakeholder theory of corporate governance focuses on the effect of
corporate activity on all stakeholders of the corporation. There is the
expectation that corporations will make efforts to reduce conflicts
between stakeholders. Agency theory suggests that corporations act
as agents of its shareholders. That is, shareholders invest in corporate
ownership and thereby entrust their resources to the management of
the directors and officers of the corporation.
I know of a company that would make decisions on pricing to the
customers at the maximum benefit to the shareholders, even though
it was highly exceeding the planned margin. There were
circumstances where a larger margin could be made, while staying
within legal guidelines, and only the current benefit to the
shareholders was considered, not the long-term relationship with the
customers. Not looking long term, to see what these customers
would do when their leases were up and would they renew with the
company. Employees working for the company questioned the
pricing strategy but were told that the decision was made and to fall
back.
Chen, J. (2022, August 18). What Is Corporate Governance? Retrieved
from Investopedia:
https://www.investopedia.com/terms/c/corporategovernance.asp
Price, N. J. (2019, November 8). The Stakeholder Model of Corporate
Governance. Retrieved from Diligent:
https://www.diligent.com/insights/shareholder-
engagement/stakeholder-model-corporate-governance/
