The Anglo-American Model Of Corporate Governance
What is corporate governance and why is it important?
In the twenty-first century, the business world is becoming increasingly concerned with bad business ethics that arise in a business environment. The world is surprised by both illegal and unethical business practices in several high-profile corporations. The existing regulatory appeared to be insufficient to manage those practices such as corruption, fraud, embezzlement. These problems force global business groups to initiate a solution to overcome and anticipate it in the future. As a result, they strengthen organizations with the implementation of corporate governance systems. These are expected to make the company run effectively based on the integrated system.
According to Cadbury
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Therefore, this essay has been divided into three parts. First, the models of corporate governance systems in different countries. Second, the principles of corporate governance. Third, the benefits of good corporate governance in the company.
“Corporate governance systems vary around the world” (Fernando, 2006, p. 53). The difference occurs because of environmental laws and regulations that differ between countries. This difference becomes the foundation of the development of some models of corporate governance to make it easier for most companies in different countries to run the system. Following are some of the models of corporate governance:
The Anglo-American Model, which has used in the US, the UK, and Canada, has adopted the “one-tier board model” (Maassen, 2002). This model emphasizes the interests of shareholders. Those are people who have invested in the company by purchasing shares of that company. They appoint the board of directors to act on behalf to run the organization. The board directors consisted of executive and non-executive directors. The executive directors are part of the company’s management team that has significant business relationships within the company, while non-executive directors are not directly part of the company. Below the directors, there is a management board comprise of the top managers, which directly
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Corporate governance systems are not same in every country, so there are several models developed to run on certain companies in different countries. When it comes to the implementation of corporate governance, there must be basic principles for guidance to assure those companies implement good corporate governance. Good corporate governance prevents companies from the corporate scandals, illegal practices, and also improves the company’s reputation, so more investors and customers interested. As a result, companies with high level of implementation of good corporate governance will earn more profits and increase their
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