Question

about amazon

10. Discuss the corporate governance (internal) mechanisms of the firm:

1. Ownership concentration
2. Board of directors
3. Compensation

Answer 1

CORPORATE GOVERNANCE(Internal) MECHANISM OF THE FIRM :

1. OWNERSHIP CONCENTRATION :

--> Ownership concentration is a significant internal governance mechanism in which owners can control and influence the management of the firm to protect their interest.

--> The ownership concentration provides two offsetting effects such as substitution effect and expropriation effect.

--> The ownership concentration in terms of promoters holding finds that promoters holding have a negative but insignificant co-relation with the corporate governance and disclosure practices of the firm.

2.BOARD OF DIRECTORS:

--> A board of directors protects the interest of companies shareholders.

--> The shareholders use the board to bridge the gap between them and company owners and directors and managers.

--> The board is often responsible for reviewing company management and removing individuals who don't improve the companies overall financial performance.

--> Shareholders often elect individual board members at corporations annual shareholder meeting or conference.

--> Large private organizations may use board of directors but their influence the absence of shareholders may diminish.

3.COMPENSATION:

--> The compensation if monitoring and non-monitoring rewards given to the employees in return for their work done for the organization.

--> Basically the compensation is of the form of salaries and wages.

--> It includes basic pay, commissions, overtime pay, bonus, profit sharing, merit pay, stock options, travel allowances, meal allowances, housing allowances.