McBride Financial Services Governance Evaluation
McBride Financial Services Governance EvaluationUniversity of PhoenixMcBride Financial Services Governance EvaluationSince 1980, corporate governance has seen a radical transformation. Before this time, public corporations were self-centered in their desire for growth, without consideration for the shareholders. Disappointed shareholders had little recourse and management controlled the seats of corporate boards. Ownership of stock and options was minor with only 20% of the compensation of U.S. CEOs tied to stock market performance (Chew & Gillan, 2004, p. 73).
A governance rating system was created to score companies, but it was not always reliable or based on accurate research. The schemes and methodologies used at times were founded on myths. Conflict of interest is questioned with some rating services performing dual roles. The reaction by corporate America to corporate governance is mixed with the belief that some regulations need clarifying.
Corporate governance problems leading up to the corporate scandals of the early 21st centuryMany events occurred that led up the corporate scandals of the 21st century. Because shareholders received little acknowledgment, without any voice, change was inevitable. The 1980s and 1990s were a period of transformation for many organizations. This transformation revolutionized corporate governance.
Hostile takeovers and restructuring activities began increasing in the 1980s in reaction to shareholder neglect. Debt financing which is defined asA company can raise working capital by issuing bonds or notes to individuals or institutions, along with a promise to pay interest as well as to repay the principal. The other major way of raising capital is to issue shares of stock in a public offering (AFR, 2008, ¶ 49)was used extensively resulting in corporate leverage ratios increasing (Chew & Gillan, 2004).
In the 1990s a brief decline in mergers occurred, but quickly returned to the same levels as in the 1980s. Hostility and leverage subsided significantly. At this...