| There is no doubt that interest in corporate | | | | It is interesting to look at the most pronounced |
| governance has substantially increased in recent | | | | tendencies in corporate governance development. |
| years. Not only have separate states adopted | | | | First, it is increasing institutional investor activism. |
| their own corporate codes but also changes in | | | | Big asset management funds, pension funds and |
| corporate governance are directed at a global | | | | other institutional investors now not only passively |
| level. For developing economies, corporate | | | | wait for return on their invested funds, but |
| governance helps to achieve stable economic | | | | discharge accountability, for instance, when it |
| growth by means of effective management of | | | | comes to directors' remuneration. Second, there is |
| corporations and, to some extent, governments | | | | some evidence of harmonization in corporate |
| (Bushman and Smith 2001). | | | | governance standards. This process is led by |
| Countries which already possess advanced | | | | globalization of international trade and financial |
| corporate governance standards strive to | | | | activities. As a result, many countries adopt the |
| strengthen adherence to them. It goes without | | | | OECD (1999) principles of corporate governance, |
| saying that the catalyst of the process was the | | | | which predominantly represent an Anglo-American |
| corporate and financial collapse of Enron. The | | | | style of governance. However, due to significant |
| crash of this company illustrated that even a | | | | political, legal, religious and other differences |
| company with good financial results might go | | | | between various countries it is difficult to expect |
| bankrupt if it lacked solid corporate governance | | | | a high degree of convergence. Third, the scope of |
| mechanisms guaranteeing trustworthy work of | | | | corporate governance goals has also increase. |
| non-executive directors, auditors and the board of | | | | Nowadays, managers of corporations make |
| directors. Following the scandal, the regulators all | | | | decisions taking into account corporate social |
| over the world developed a number of policies to | | | | responsibility. In other words, social and |
| prevent further failures (Papers4you.com, 2006). | | | | environmental issues now increasingly determine |
| Among the most influential documents are the | | | | how well the company performs (Alexander and |
| Sarbanes-Oxley Act of 2002 and the Higgs | | | | Buchholz 1978). To sum up, corporate governance |
| Report of 2003. | | | | in the 21st century is the system of checks and |
| So what is corporate governance? There exist | | | | balances which ensures that business entities act |
| numerous definitions of corporate governance, | | | | in a socially responsible way in all their endeavors, |
| though most of them can be divided into the so | | | | while maximizing shareholders' value. |
| called "narrow" and "broad" views (Shankman | | | | References |
| 1999). The former emphasizes the role of | | | | Alexander, G. J. and R. A. Buchholz (1978). |
| corporate governance in improvement of the | | | | "Corporate social responsibility and stock market |
| relationship between an enterprise and its | | | | performance." Academy of Management Journal |
| shareholders. In other words, the main stress | | | | 21(3): 479-486. |
| here is on resolving the agency problem. On the | | | | Bushman, R. M. and A. J. Smith (2001). "Financial |
| other hand, the latter and more modern approach | | | | accounting information and corporate governance." |
| states that corporate governance facilitates | | | | Journal of Accounting and Economics 32: 237-333. |
| relationships not only between a company and its | | | | Papers For You (2006) "C/F/119. Globalization and |
| shareholders, but also between different | | | | Corporate Governance", Available from [19/06 |
| stakeholders in the company, including employees, | | | | 2006] |
| customers, suppliers, bondholders and the | | | | Papers For You (2006) "P/F/397. Corporate |
| government. Therefore, corporate governance | | | | governance and Sarbanes Oxley Act law", |
| becomes important for the society as a whole | | | | Available from [19/06/2006] |
| (Papers4you.com, 2006). There is growing | | | | Shankman, N. A. (1999). "Reframing the debate |
| evidence that recent changes in corporate | | | | between agency and stakeholder theories of the |
| governance make its practical realization | | | | firm." Journal of Business Ethics 19: 319-334. |
| conforming to the second view. | | | | |