Corporate Governance Matters, 3rd Edition

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International Corporate Governance

In Chapter 1, 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

Differences in these factors have important implications ...