According to Lipton and Herzberg (2006 p.24), a company is an artificial entity recognised by the law as legal persons with rights and liabilities separate from their shareholders, stakeholders or members. A company comes into existence as a body corporate at the beginning of the day on which it is registered with the name specified in its certificate of registration. As stakeholders are very significant part of a company, which is defined as a third party chosen by two or more persons to keep in deposit property or possession of which is contested between them, and to be delivered to the one who shall establish his right to it. But as being a part of a company, stakeholders may find themselves in conflict with the company on various issues based on division of powers, management control etc. (Tomasic, Jackson, Woellner 1992). So to cover this point of conflict, corporate governance mechanisms were being produced.
04-02366 Donald W. Douglas and David R. Davis who ...
English: Corporate Governance
English: Corporate GovernanceAccording to Lipton and Herzberg (2006 p.282) , Corporate governance is not a legal term and is used to describe the rules and practices put in place within a company to align the interests of management with the interests of stakeholders. These interests may get diverged because of the separation of ownership and control and the different interests of stakeholders which makes the corporate governance debate crucial. Corporate governance is basically concerned with how corporations are controlled and the accountability and control mechanisms to which they are subjected. These mechanisms aim to ensure that the management is accountable to the board and the board is accountable to the stakeholders. Here, good Corporate governance is important because it structures encourage companies to create value and provide accountability and control systems commensurate with the risks involved (Lipton and Herzberg 2006). Good Corporate governance should provide proper incentives...