Corporate governance refers to the resolution of collective action to manage problems among investors who have disagreed, resulting in their dispersal and, as a result, the resolution of conflict of interest between the involved parties in order to save the business enterprise that they had in place.
Corporate governance has a representative of stakeholders who always have diverse ideas and viewpoints on every issue that concerns the business organization. To ensure that the influence of directors is experienced and they obtain full support of the board of directors then they have to work together and convince others to make a similar vote towards the establishment of resolutions in general meetings. The issues always arise when some stakeholders decline to support due to their demand for more information as to why they have to support the idea. This sometimes hinders implementation of policies that could have improved the state of their investment.
The accounting information once requested by a section of stakeholders also means a problem in the finances. This is always used to monitor directors and the financial activities that have taken place. Once a problem has been identified in the financial reporting the issue always leads to lack of effectiveness and trust of the corporate governance. The issue can, therefore, be corrected by involving external audits to find out any financial issue before the accounting information is supplied.
The issue is that in the presence of small shareholders they are always accorded free ride on the judgments of bigger professional investors. The assumption is always in most cases that the market is efficient which leads to efficient-market hypothesis problem in the long-term which affects the business operation.
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