Corporate Governance, a Concept Which Has Succeeded

Corporate governance, a concept which has succeeded in attracting a lot of public interest due to its perceived importance for the corporations' and society' economic health in general has been accorded several definitions. Shleifer and Vishny (737) defined corporate governance as a concept that deals with the manner in which suppliers of various financial services to corporations somehow assure themselves of getting some good return on their investment. OECD (1999) on the other hand defines corporate governance as a system by which various corporations are effectively directed as well as controlled. The structure of corporate governance specifies the form of distribution of rights as well as responsibilities among various different participants in a given corporation. The participants include the board of directors, managers, stakeholders as well as the shareholders. The corporate governance structure lays down the rules as well as procedures to be used for making various decisions on the relevant corporate affairs. The structures also provide a framework for setting the company's objectives and monitoring of corporate performance. Merchant & Van der Stede (577) noted that corporate governance should be spearheaded by the board of directors while being aided or monitored by controllers and auditors who are all concerned with the ethical issues related to management control (Merchant & Van der Stede 631)

The basic principles of corporate governance

There are several basic principles that act as the foundation and basis of corporate governance. The very first one is the need to ensure that the corporate governance framework that is put in place should help in the promotion of a transparent and yet efficient markets that are consistent with the rule of law while able to clearly articulate the various divisions of responsibilities that exists among various regulatory, supervisory and enforcement authorities (OECD 17).

The second basic principle of corporate governance relates to the rights of stakeholders as well as the key functions of ownerships. This is important since it protects as well as facilitates the exercising of shareholders' rights (OECD 18).

The third basic principle of corporate governance relates to the need for having an equitable treatment of all shareholders. This is important in ensuring that there is an equitable treatment of the entire shareholder (foreign and minority shareholders included). All of the shareholders must be provided with the opportunity of a thorough redress for any form of violation of their basic rights (OECD 20).

The fourth basic principle of corporate governance relates to the role of shareholders in instilling governance. This means that the corporate governance framework must fully recognize the rights of all stakeholders that are established by law as well as mutual agreements. This cooperation is important in creating jobs, wealth, financial stability as well as sustainability (OECD 21).

The fifth basic principle of corporate governance is related to the need of disclosure as well as transparency within organizational ranks. This is important in ensuring that there is a timely as well as accurate disclosure on all matters that relates to the corporation such as performance, finances, ownership as well as the governance of the corporation (OECD 22).

The goals and basic requirements of Sarbanes-Oxley (SOXI?

According to Coates (97), the main goal of SOX is to improve the level of audit quality while reducing fraud incidences on the basis of cost-effectiveness. The SOX requires that there is high quality and minimal fraud within the Public Company Accounting Oversight Board. It therefore aims to improve governance and accountability within the PCAOB's. It also evaluates the disclosure of the control System as well as Auditor Attestation.

The external mechanisms for aligning owner and manager interests

The external systems of aligning the manager and owner interests are dependent on the market sources that control the managers. These includes the importance of corporate takeovers, replacement of managers as well as the enforcement of law and other corporate laws as dictated the company's policies (Lisboa 4)