Main Elements Of Corporate Governance

Throughout this report I will evaluate the main elements of modern corporate governance structures and I will then focus and explain each of these and how they lead to good governance and how management accounting has a role in supporting them.

Over time the meaning of corporate governance has been debated and discussed by economists not only in managerial economics but also in many other areas. In 1992, Adrian Cadbury described corporate governance as the “system in which companies are directed and controlled” (Cadbury,1992).

But many other economists have completely different views and depictions of the term corporate governance. Cadburys statement above is only one sentence on corporate governance which other economists could write a thousand

Operational control of large corporations is delegated to professional managers and then this will be looked at by the board of directors who have financial interest in the firm. Corporate governance is hugely important for a company’s success. Corporate governance allows companies to identify potential risks. Internally, it gives the company a chance to fix the problem before it arises. Ireland was ranked in 2008-2009 5th highest out of 181 countries by the world bank. This is huge for the Irish economy leading to direct investment from multi-national companies. E.g. Google, Boston Scientific, Pfizer etc. From this ranking these multinational companies see Irelands economy as a stable and prosperous country leading to these companies basing their headquarters in Ireland leading to new employment opportunities for the Irish as well as increasing money coming into the

No matter how the other areas of the business are governed if they lose focus on the budgeting side of the business, it can lead to financial failure and failure of the business. As outlined previously with the Enron scandal leading to the failure of Enron from poor financial decisions from their chairperson. If the business is correctly governed by a team, there will be budgeting in place so these mistakes cannot occur. Budgeting involves setting out monthly or annual reports or budgets showing what the business will be spending the money on as to not over spend. Businesses will use the management accounting methods at the start of a year or budget and compare actual to budget at regular intervals. Budgeting contributes heavily to good corporate governance as they have a system in place. If the business plans and prepares its budgeting the business will