BASIC THEORIES OF CORPORATE GOVERNANCE
What is agency theory?
This theory assumes managers may not always act in the best interest of shareholders.
What is the Anglo-American model?
This model, used in the U.S. and U.K., prioritizes shareholders and market discipline.
What is the board of directors?
This governing body is legally responsible for the strategic oversight of a corporation.
What is the company secretary?
This officer ensures board procedures are followed and records are maintained.
What is stakeholder theory?
This theory emphasizes the role of all stakeholders, not just shareholders, in corporate governance.
What is the Continental (or German/Japanese) model?
This model, used in Germany and Japan, emphasizes long-term relationships with banks and stakeholders.
What is the CEO (Chief Executive Officer)?
This executive is primarily responsible for the daily operations of the company.
What is the annual general meeting (AGM)?
This mechanism allows shareholders to influence governance through voting.
What is stewardship theory?
This theory highlights the influence of relationships and trust in governance, especially in family businesses.
What is the family-based or emerging markets model?
This model relies on concentrated family ownership and state involvement, common in Asia and Latin America.
What is the audit committee?
This board committee ensures the integrity of financial reporting and compliance.
What is executive management?
This term refers to the CEO and senior leadership team of a company.
What is transaction cost economics (or transaction cost theory)?
This theory focuses on how firms use governance to align interests and reduce transaction costs.
What is the two-tier board system?
This corporate governance model includes both a supervisory board and a management board.
What is the remuneration (or compensation) committee?
This board committee oversees CEO pay and benefits.
What is oversight (or supervisory duty)?
This is the duty of the board to protect shareholder investments and ensure transparency.
What is legitimacy theory?
This theory emphasizes the importance of firm legitimacy and aligning with social expectations.
What is the unitary (or single-tier) board system?
This system, common in the U.S., merges management and oversight roles into a single board.
What is the nomination committee?
This board committee handles appointments and succession planning.
What is fiduciary duty?
This duty requires directors to prioritize the company’s interests above personal gain.