Business Sustainability, Corporate Governance, and Organizational Ethics

CHAPTER 20Monitoring Function

1. Introduction

The monitoring function of corporate governance is the direct responsibility of shareholders and other stakeholders (e.g. employees, customers, creditors, suppliers) who should be attentive to and engaged in corporate governance. The monitoring function of corporate governance can be achieved through direct participation of investors in the business and financial affairs of corporations or through intermediaries, such as security analysts, institutional investors, and investment bankers. Shareholders as owners of public companies by being attentive and engaged, play an important role in corporate governance. Shareholders play an important role in corporate governance by electing directors who appoint management to make day-to-day business decisions for public companies. Institutional investors are regarded as important monitors of public companies, their corporate governance, and their financial disclosures as they own more than half of all US public securities. This chapter presents the important role that shareholders and other stakeholders can play in improving corporate governance effectiveness.

Learning Objectives

• Discuss shareholder responsibilities in monitoring the effectiveness and validity of corporate governance.
• Provide insight for strengthening shareholder rights.
• Discuss the role institutional investors play in ensuring effective and responsible corporate governance.
• Provide methods employees can utilize to participate ...