CORPORATE GOVERNANCE SYSTEMS
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Corporate governance is
a relationship among stakeholders that is used to determine and control the strategic direction and performance of organizations
concerned with identifying ways to ensure that strategic decisions are made effectively
used in corporations to establish order between the firm’s owners and its top-level managers


Corporate Governance Mechanisms

Internal Governance Mechanisms

Board of Directors

Managerial Incentive Compensation

Ownership Concentration

Separation of Ownership and Managerial Control


Basis of the modern corporation
shareholders purchase stock, becoming residual claimants
shareholders reduce risk by holding diversified portfolios
professional managers are contracted to provide decision-making
Modern public corporation form leads to efficient specialization of tasks
risk bearing by shareholders
strategy development and decision-making by managers