worldcom.ppt

Corporate Governance: the WorldCom Scandal UGBA107 Week 11 Agenda for the day Discuss essay questions from the midterm Corporate Misfeasance What is Corporate Governance? How can we improve Corporate Governance? Midterm Results Corporate Governance Definitions of Corporate Governance Corporate governance is a field in economics that investigates how to secure/motivate efficient management of corporations by the use of incentive mechanisms, such as contracts, organizational designs and legislation. This is often limited to the question of improving financial performance, for example, how the corporate owners can secure/motivate that the corporate managers will deliver a competitive rate of return, , Mathiesen [2002]. This definition can be illustrated as a transaction cost based theory of the managerial agency problem. “Corporate governance deals with the ways in which suppliers of finance to corporations assure themselves of getting a return on their investment”, The Journal of Finance, Shleifer and Vishny [1997, page 737]. Corporate governance is the system by which business corporations are directed and controlled. The corporate governance structure specifies the distribution of rights and responsibilities among different participants in the corporation, such as, the board, managers, shareholders and other stakeholders, and spells out the rules and procedures for making decisions on corporate affairs. By doing this, it also provides the structure through which the company objectives are set, and the means of attaining those objectives and monitoring performance, OECD April 1999. OECDs definition is consistent with the one presented by Cadbury [1992, page 15]. Corporate governance - which can be defined narrowly as the relationship of a company to its shareholders or, more broadly, as its relationship to society -…., from an article in Financial Times [1997]. Corporate governance is about promoting corporate fairness, transparency and accountability J. Wolfenso