Question

Should corporate governance law seek to create incentives for shareholder participation or recognize the limitations of shareholder participation and primarily rely on substantive restrictions on management and corporate boards? Please make your argument with reference to specific examples from throughout the course.

Answer 1

Corporate governance law should be seeking to create incentive for the shareholder participation because participation of shareholder will be always ensure that management is trying to place adequate focus upon maintenance of proper corporate governance which will be helpful in order to follow the norms of the corporate governance and help them to adhere to the corporate governance rules so that there could not be any kind of implication of litigation failure on the part of the management and corporate governance is one of the important aspect of the contemporary world which will help in maximizing the interest of all the stakeholders of the organisation because it is about creation of value of organisation in the long run by defining proper rules and guidelines which will be helpful in proper ethics establishment and high degree of disciplinary management in corporate issues so that proper rules and regulations should be followed and there should be minimum possibility of commitment of any kind of fraud, so it will help in overall creation of value in the long run for the company and it also helped the management as well as shareholder to synchronise the goals with the goals of the organisation and the goals of other stakeholders.

Placing restrictions on management and corporate board is a type of regulatory procedure which is traditional in nature and it is not incorporating for participative nature of adherence to the corporate governance because it will be forcing the management in order to follow with the rules and regulation which will not be effective because management would be trying to manufacture these corporate governance issues according to their own advantage which will not be beneficial in the long run so there should always be proper focus upon participation of the shareholder in order to synchronise the objective of Management to follow with the maximum adherence to the corporate governance standard which will be beneficial in the long run.