Corporate Governance and Management of Small Business Enterprise: An Executive Summary

Essay by TomJLUniversity, Master's February 2008

download word file, 6 pages 4.0

Shea (2006), in quoting the work of Steiner & Steiner (2006) explained that corporate governance is generally referred to overall control of activities in a corporation that involves the formulation of corporate objectives, strategies, and plans and the proper management structure in order to be responsible to its various stakeholders. Since the 1990s, the term corporate governance has become a business jargon around the world. The literature on stakeholder theory suggests that business corporations should go beyond the traditional approach to protect shareholder interests and be more responsive to demands from both powerful and fringe stakeholders (Preble, 2005).

Sometime in 1998, the Malaysian government purported to establish a High Level Finance Committee (‘the Committee’) to look into establishing a framework for corporate governance and setting best practices for the Malaysian corporate sector (Singam, 2003). According to the Committee in their Report on Corporate Governance 1999 (‘the Report’), corporate governance is defined as, ‘the process and structure used to direct and manage the business and affairs of the company towards enhancing business prosperity and corporate accountability with the ultimate objective of realising long term shareholder value, whilst taking into account the interests of other stakeholders’ (Singam, 2003).

According to a survey conducted by Standard & Poor’s Governance Services and the Corporate Governance & Financial Reporting Centre at the National University of Singapore (Shea, 2006), it has demonstrated that listed companies in Malaysia surveyed score an average of 43 corporate governance points out of a maximum of 140. The score is quite far below listed companies in Singapore which was 81.

Corporate Governance and Small or Medium-sized BusinessIt has been accepted that as a rule, people choose more security or protection when they possess more things that are considered valuable to them. Observations of homeowners, merchants, and institutions support this view: those...