Corporate governance

Abstract

The problem of corporate governance is one of principal-agent conflict between the shareholders and the managers. Two other types of conflict can exist: one between the controlling shareholders and the remaining shareholders and one between the shareholders and various non-shareholders, such as bondholders, labor, other creditors, and the state. The report surveys the laws of 32 countries and reaches the following conclusions. The board of directors is the prime actor in corporate governance. Reform of corporate governance depends upon the proper functioning of the board. The rights, duties, and liabilities of the directors are the traditional domain of corporate law. Shareholder protection is a major concern of corporate governance. Stakeholder interests are also of concern. The role of gatekeepers, such as auditors and other professionals, is a critical to corporate governance. Enforcement of rules is essential to effective corporate governance.