Corporate governance is a question of performance accountability, is essential as through it protection of shareholders from self-interested managers. More recently it is defined as to save the interests of minority shareholders from the majority shareholders. One significant part , it has no relation to corporate strategy. Some people consider it not relevant
at all. If we look it intimately the corporate governance is closely related to strategy as with it goodwill flows of the corporate and also safeguarding the interests of shareholders. So, corporate governance is deeply engulfed with the strategy of corporate and its directions and achievements.
|Outsider and insider systems:
In outsider system of corporate governance ownership and responsibly spread across a vast number of anonymous shareholders. Here the formulation and implementation of strategies solely rests with management. Ultimately, this been detected and managed by the majority shareholders and thus problem may arise in the long run. In case of this system the anonymity is the advantage as well as the disadvantage as the policy decisions takes time and flexibility of decision making takes time and the whole system looks traditional. On the other hand this can be benefiting as the market sees a particular trend going on so it can augment the trust value and the share and stock consistency.
In the insider systems, identifiable large shareholders or majority shareholders which is built upon the trust and commitment with each other. Here the problem is that the majority shareholders or the dominant players decide upon the out come bids. Thus there is the possibility of side payments, private interests and so on.
In the outsider systems the outcomes are determined through values of shareholders. The other stakeholders like purchasers, suppliers and employees interest are not protected. This shows that different systems will succeed at different situations and both the systems have some very good benefitting points but the fact of the matter is that it is to be implemented across various parameters looking at the interests of majority shareholders , minority shareholders and stockholders etc.
Corporate governance is central to achieving the good performance and to safeguard the abuse of minority investors. In UK and US it is “outside ownership” systems without much layers and pyramids. In continental Europe and Asia, in contrast “inside ownership” thus protecting the values of stake holders and also shareholders among themselves. Inside system shows trust and commitment and in contrast the outside systems gives flexibility to the new and upcoming technology and emerging trend markets.