Question

Explain the challenges inherent with global corporate governance. Presents a logical, concise explanation of the difficulty in maintaining global corporate governance

Answer 1

Corporate governance is a process that aims to allocate corporate resources in a manner that maximizes
value for all stakeholders – shareholders, investors, employees, customers, suppliers, environment and
the community at large and holds those at the helms to account by evaluating their decisions on
transparency, inclusivity, equity and responsibility. The World Bank defines governance as the exercise of
political authority and the use of institutional resources to manage society's problems and affairs.
Corporate governance is the set of processes, customs, policies, laws, and institutions affecting the way a
corporation (or company) is directed, administered or controlled. Corporate governance also includes the
relationships among the many stakeholders involved and the goals for which the corporation is governed.
In contemporary business corporations, the main external stakeholder groups are shareholders, debt
holders, trade creditors, suppliers, customers and communities affected by the corporation's activities.
Internal stakeholders are the board of directors, executives, and other employees.
There are many different models of corporate governance around the world. These differ according to the
variety of capitalism in which they are embedded. The Anglo-American "model" tends to emphasize the
interests of shareholders. The coordinated or multi-stakeholder model associated with Continental Europe
and Japan also recognizes the interests of workers, managers, suppliers, customers, and the community.
Issues in Corporate Governance
Asymmetry of power
Asymmetry of information
Interests of shareholders as residual owners
Role of owner management
Theory of separation of powers
Division of corporate pie among stakeholders

Current status on corporate governance
Insistence on forms and structures
Overarching regulations
Regulatory overkill
Lack of adequate number of strong, independent directors
Large liabilities for companies and officers

Current status on corporate governance
Governance and performance
Good governance leads to good performance
It creates an open and transparent system
It improves communication and breaks down systematic barriers to flow of information
Good governance allows decision making based on data. It reduces risk
Good governance helps in creating a brand and creates comfort for all stakeholders and society .
Corporate Governance-compliance Issues
Governance, Risk Management, and Compliance or GRC is the umbrella term covering an
organization's approach across these three areas. Being closely related concerns, governance, risk and
compliance activities are increasingly being integrated and aligned to some extent in order to avoid
conflicts, wasteful overlaps and gaps. While interpreted differently in various organizations, GRC typically
encompasses activities such as corporate governance, enterprise risk management (ERM) and corporate
compliance with applicable laws and regulations.
Governance describes the overall management approach through which senior executives direct and
control the entire organization, using a combination of management information and hierarchical
management control structures. Governance activities ensure that critical management information
reaching the executive team is sufficiently complete, accurate and timely to enable appropriate management decision making, and provide the control mechanisms to ensure that strategies, directions
and instructions from management are carried out systematically and effectively.
Risk management is the set of processes through which management identifies, analyses, and where
necessary responds appropriately to risks that might adversely affect realization of the organization's
business objectives. The response to risks typically depends on their perceived gravity, and involves
controlling, avoiding, accepting or transferring them to a third party. Whereas organizations routinely
manage a wide range of risks (e.g. technological risks, commercial/financial risks, information security
risks etc.), external legal and regulatory compliance risks are arguably the key issue in GRC.
Compliance means conforming with stated requirements. At an organizational level, it is achieved
through management processes which identify the applicable requirements (defined for example in laws,
regulations, contracts, strategies and policies), assess the state of compliance, assess the risks and
potential costs of non-compliance against the projected expenses to achieve compliance, and hence
prioritize, fund and initiate any corrective actions deemed necessary.
Widespread interest in GRC was sparked by the US Sarbanes-Oxley Act and the need for US listed
companies to design and implement suitable governance controls for SOX compliance, but the focus of
GRC has since shifted towards adding business value through improving operational decision making
and strategic planning. It therefore has relevance beyond the SOX world.
Governance, Risk, and Compliance or "GRC" is an increasingly recognized term that reflects a new way
in which organizations are adopting an integrated approach to these aspects of their business.