Essay On Lack Of Corporate Governance

Abstract

SMEs play a very crucial role in development of economy and also help in poverty reduction. It also helps in boosting the rate of GDP and increases the standard of living of people. But nowadays, the main problem is Corporate Governance. Companies face the problem of transparency and accountability to their shareholders, therefore the concept of Corporate Governance is introduced. Lack of corporate governance is the main constraint of SMEs development. Generally, people are unaware of this concept but when known, should adopt it. There is a strong connection between corporate governance and economic growth and company’s profitability. They are directly related to each other. Much importance has been gained by corporate governance in

They are like an engine to the economy.

2. They are important vehicle for employment generation and poverty reduction.

3. These sectors have high competition which is useful for the diversification of economy.

4. They also contribute in reducing inequality of wealth among people.

Therefore, it is imperative for the economy of developing country to accelerate the pace of SME sector. In the last few years, they have gained much importance as they accelerate the economy.

Good corporate governance leads to development of a framework that provides adequate protection to the interests of stakeholders. It encourages companies to achieve the corporate objectives with more efficient use of resources. It should recognize the rights of stakeholders as established by law. It is critical for development of a healthy and economic growth. It also helps in boosting the GDP of corporate sector.

For a SME sector, corporate governance is concerned with roles of shareholders who act as owners as well as lying out rules and procedure related to ensuring the integrity of financial results. Every goal of the small company is to grow and compete with larger ones, many scholars agree that corporate governance sets precedents for future

Shahnawaz Mahmood (2008) article highlights that corporate governance is not only important for large companies but also small and medium enterprises. SMEs around the world are increasingly becoming aware of the importance of good, trusting relationship with customers, employees , suppliers and government.

Sir Adrian in the preface to the World Bank Production ‘ Corporate Governance : A framework for implemenation’ (Sept 1999) – It is concerned with holding the balance between economic and social goals and between individual and communal goals. The governance framework is there to encourage the efficient use of resources.

Cochran and Warwick (1988) define corporate governance as an umbrella term that includes specific issues arising from interaction among senior management, shareholders and other corporate stakeholders.

Shliefer and Vishney (1997) define as the ways in which suppliers of finance to corporations assure themselves of getting a return on their