An Overview of Corporate Governance

The concept of corporate governance has attracted researchers’ attention around
the world over the last twenty years due to several factors. These factors include the
widespread of capitalism and the rapid speed of privatization; the growth of
companies; deregulation, and the integration of capital markets and globalisation;
pension fund reform and the growth of private savings; shareholder activism; the
1998 East Asia crisis; and a series of U.S. scandals and corporate failures of late,
example Enron and WorldCom, Brecht et al. (2002). The term “corporate
governance” is relatively an emerging one worldwide in all sectors, although in
practice it has been in existence for much longer, at least since Berle and Means
(1932) and even much earlier in Smith (1776). Various definitions and perceptions of
corporate governance have been provided in the literature over the last 20 years. A
general interpretation considers corporate governance as the relationship between
corporate managers, directors and the equity capital providers. It also extends to the
relationship of the corporation to stakeholders and society. According to Yoshikawa
&Phan (2001), strong global competition and rapid technological changes lead to
lower cost margins which in turn force firms to focus on asset efficiency and
shareholder value maximization for the aim of accessing funds to fuel growth
opportunities. This has catalysed global competition between capital markets and the
evolution of corporate governance around the world.