PHI 2397 Lecture Notes - Lecture 11: Canada Revenue Agency, Stakeholder Theory
10 Dec 2016
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Document Summary
Corporate governance: the control put in place to ensure the corporation act ethically, transparently and for the interest of shareholders. Can also be defined as the relationship between executives and owners to direct the performance of a corporation for the interests of the shareholders. Problems arise from the separation of ownership and management. Corporate governance is put in place to mitigate those problems. Take excessive risk to earn large bonus. Principles: entities who high in rank of importance or ownership. Agent: entities who represents for interest of another party (managerial, Shareholder and executives need sufficient information to perform control and monitor -> effective information system. Control: incentives that align the interest of shareholders and executives. Original purposes: board of directors is selected by shareowners to represent them, perform managerial responsibility of the corporation and act on the interest of shareholders. The use of bonuses, salary increase and long-term monetary incentives to align manager"s and shareholders" interest.
