Essentials of Corporate Governance

Chapter 1. Corporations

After reading this chapter, you will be able to

• Understand what a corporation is

• Understand how corporations are organized

• Understand the concept of capital structure

• Understand the concept of governance

• Understand the competing goals that corporations may have

• Understand why there is a call for corporations to be more ethical

Before moving directly into a discussion of good Corporate Governance, it is important to create a foundation based on the initial concepts of the corporation, its role in society, and its organization.

The corporation, like no other fictional entity, has created an unprecedented volume of debate and discussion. There are those who argue for its existence, its reform, and its abolishment. There are groups that study the corporation in terms of its sociological impact on individuals and those who study the corporation in terms of its impact on itself.

At the core of all meaningful discussions of the corporation is the concept of Corporate Governance.

This chapter discusses corporations in terms of defining what they are and how they are organized. This chapter also introduces the concept of corporate ownership, a theme that is carried throughout each part of this book.

In addition, readers will learn about theories suggesting the possible purposes of the corporate structure and the concept of corporate ethics. Finally, this chapter closes with an introduction into the concept of Corporate Governance as a nonnormative descriptive term used to express ...