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Corporate governance has evolved into an important institute within recent years because of the highly visible corrupt and unethical practices of large and global companies such as Enron WorldCom and Parmalat the Italian dairy conglomerate These scandals had left stakeholders and governments in a disorientated state It has always attracted attention due to its apparent importance for the economic health of corporations and society in general The concept is poorly defined as it potentially covers a large number of distinct economic phenomenons As a result different definitions that reflect peoples special interest in their fields have emerged Mathiesen 2002 posits that corporate governance is a field in economics that investigates how to securemotivate effective management of corporations by the use of incentive mechanisms such as contracts organizational designs and legislation to improve financial performance The Organization for Economic Cooperation and Developments OECD 1999 definition is consistent with the one presented by Cadbury 1992 who stated that corporate governance is the system by which business corporations are directed and controlled The structure specifies the distribution of rights and responsibilities transparently among different participants in the corporation such as the board managers shareholders employees bankers and other stakeholders and spells out the rules and procedures for making decisions on corporate affairs By doing this it also provides the structure through which the companys objectives are set and the means of attaining those objectives and monitoring performance The importance of improved corporate governance may be better appreciated by looking at the key corporate actors It will be useful to know about the composition role organization operation and evaluation of the Board of Directors Chief Executive Officer and Management Their performance have a direct relationship to the stockholders investors employees communities and governments in terms of costs and benefits and changing the rules of corporate governance will have varying impacts on these various groups The United States has the best corporate governance of financial reporting and securities
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