In Chapter 1, “Introduction to Corporate Governance,” we defined corporate governance as the collection of control mechanisms that an organization adopts to prevent or dissuade potentially self-interested managers from engaging in activities detrimental to the welfare of shareholders and stakeholders. The governance system that a company adopts is not independent of its environment. A variety of factors inherent to the business setting shape the governance system. These factors include the following:
• Efficiency of local capital markets
• Extent to which the legal system provides protection to all shareholders
• Reliability of accounting standards
• Enforcement of regulations
• Societal and cultural values ...