Research Problem
Corporate governance is known as the sets of laws, regulations, listing rules, corporate codes and judicial systems that govern the relationships among shareholders, directors and managers of corporations. Corporate governance codes or best practices guides have been adopted by many organizations, from stock exchanges, such as the Stock Exchange of Hong Kong; to supranational organizations, such as the Organization for Economic Cooperation and Development (OECD); to institutional investors, such as the California Public Employees Retirement System. These codes identify the characteristics that adherents believe to be hallmarks of good corporate governance (Mueller 2003). There is also plenty of evidence within markets that those companies that feature high standards of corporate governance have also achieved higher valuations than other companies in similar industries within the same country or region. That element alone lowers the cost of capital for these companies allowing for additional growth opportunities. Proper corporate governance is also critical to capital market development over the long run. This is true for domestic as well as foreign investors. Many emerging economies have begun comprehensive pension schemes that invest in domestic fixed income securities and equities. The long-run success of these programs is critical to the development of the economies and is a primary source of domestic capital accumulation. It is in the interest of people to have the infrastructure for good capital market development in place. Corporate governance is a keystone to that foundation (Herman, Pietracci & Sharma, 2001). This proposed study wants to determine the central problems of corporate governance of Pakistani listed companies and their mechanisms.
Aims and objective
Literature Review
In recent years, considerable attention has been devoted to differences across countries in the institutional environments in which corporations operate, and the consequences of these institutional differences for corporate performance. One branch of this literature has been concerned with corporate governance structures. Under the broad heading of corporate governance are usually included the identity and degree of concentration of ownership, the institutional structure by which owners monitor and control managers by means of boards of directors and the like, and the institutional structure for disciplining and replacing managers as, for example, through proxy contests and/or takeovers. Although corporate governance structures are imbedded within the broader legal system of a country and thus are affected by it, the two sets of institutions are not synonymous. One distinction drawn within the corporate governance literature is between insider governance systems in which ownership stakes are concentrated and the major stakeholders are directly represented on the boards that monitor managers, and perhaps in management itself, and outsider governance systems in which ownership stakes are dispersed, and owners exercise indirect control on management by electing representatives to the monitoring boards, or perhaps by voting on specific proposals of management (Kakabadse 2001). The spread of information and the globalization of markets will, however, have some important effects on the cycle of growth. Innovators may lose their leadership positions more quickly than before, or will have to work harder to retain them. More intense competition in product markets reduces managerial discretion by denying managers resources to pursue their own goals. The globalization of capital markets should bring about a convergence in institutional structures and constraints on managers in which countries will only be able to attract capital if their institutions offer capital suppliers adequate protection against managers who place their own interests above those of outside or minority shareholders. Thus, intensified product market competition and improved corporate governance structures around the world should reduce, but most likely not eliminate, problems of managerial discretion (Colley Jr., Logan & Stettinius 2005).
Methodology
Qualitative method will be used in the study. Qualitative method thrives on understanding data through giving emphasis on determining people’s words and actions. Qualitative method has an orientation that it should gather data that can be acquired through quantitative methods. The research will make use of a descriptive research. Descriptive method of research attempts to describe a data that was gathered. Descriptive approach focuses on the questions regarding what things are like, not why they are that way. The descriptive approach has a wide range that involves. A descriptive research deemed as competent creates a notion that the existence of problems would be more difficult to deny.
References
Colley Jr., JL, Logan, GW & Stettinius, W 2005, What Is
corporate governance?, McGraw-Hill, New York.
Herman, B, Pietracci, F & Sharma, K (eds.) 2001, Financing for
development: Proposals from business and civil society. United
Nations University Press, New York.
Kakabadse, A 2001, The geopolitics of governance: The impact of
contrasting philosophies, Palgrave, New York.
Mueller, DC 2003, The corporation: Investment, mergers and
growth, Routledge, New York.
Credit:ivythesis.typepad.com
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