A Review Of The Corporate Governance Commerce Essay

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In this paper Prof. Goodijk tries to establish the relationship between labor management industrial relations, and corporate governance by in depth analysis comparing the European and the Anglo-Saxon corporate governance principles and models through to the national systems government. Goodijk states that corporate governance takes into account the interactions and relationships between management, labor and capital. The resultant relationships from the interaction of labor, capital and management have a direct impact on the level of stakeholders' dedication and participation. The relations between the three factors take place in the institutional environment of the company i.e., pressures from either of the financial markets (Anglo Saxon on The European market and vice versa), globalization, labor relations, maximization of shareholder value and legislation. He points out the major areas of question in the corporate governance debate as operation and quality of the board, quality of supervision and accountability to shareholders and stakeholders. .

Corporate Governance Theories

Part three discusses the corporate governance theories. He starts by discussing principle-agent problem of the agency theory. Here the principle compensates an agent for performing costly activities useful to the principle. The problem arises when the agent does not have the principles' best interests leading to possibilities of conflicts between the agents and the stakeholders.

The second theory is the Theory of Transaction Cost Economics of Ronald Coase, 1932. This theory compares the cost of outsourcing and production of goods for costs reduction in terms of operation costs, search costs, contracting costs and coordination. The lower channel is preferred.

The third theory he discusses is the stake holder theory; it requires the management to come up with balanced strategies suiting all the different stakeholders. The other theories discussed in passing are the stewardship theory where the managers are believed to act in best interest of the company and the resource dependence theory. He underscored that the theories are mainly concerned with the stakeholders, management quality, transparency and accountability.

Furthering his discussion on corporate governance he compares the outsider system governance (Anglo-Saxon) versus the Insider system (Rhineland network) governance. Insider model of corporate governance has the owners monitoring, supervising and controlling the companies from within while an outsider system mostly by the UK and US is characterized by external owners undertaking the core corporate governance functions. The stakeholders with up to a maximum of 3% ownership have do not actively participate in the company's management.

Corporate Board Structures

On corporate board structures, he expounds on the structures of the board structures and the roles of the various sub committees. There are two types of board structures namely; unitary and dual board. The dual board also called two-tier board has a separate supervisory board from the managing director's board. This system is common in the Netherlands and Germany.

He then discusses the third aspect of the corporate governance debate concerning stakeholders' approach. Goodijk defines a stake holder as any individual or group that can be affected by the success or failure of a company's performance (P 5). The stakeholders approach focuses on the importance of establishing credible relationships with all the stakeholders while balancing it out to satisfy then needs of shareholders and the management. This article outlines the stages for stakeholder management as stakeholder management, stakeholder management through provision of relevant information and participation tools and the use of management for equal satisfaction of the all the stakeholders.

Section four discusses the codes of corporate governance developed by different companies. He points out that the difference is as result of the notion "not one size fit all" (p6). Codes are basically a set of rules providing proper guidelines on the interactions of shareholders, capital and management. Some of the most influential codes developed by the European countries include UK Cadbury Code (1992), Combined Code, The Report and Action plan of the EU High Level Group of Company Law Experts and the OECD. These codes have three fundamental features in them; how to increase shareholders' influence, how to develop the shareholders performance, how to take care of other shareholders interests and how to raise the boards performances.

Goodijk like other author agrees with the works of other authors of comparing the European (Rhineland) model to the Anglo-Saxon models of corporate governance using the merits and demerits criteria. The major differences between the two models lie on the short term versus long term relations, inconsistency versus harmony orientation, outsider versus insider system, concentrated ownership versus dispersed ownership. It is also important to note that within the European set up relationships and the involvement of shareholders is highly stressed unlike within the Anglo-Saxon countries where the spotlight is on shareholder value maximization. High levels of commitment of stakeholders leads to decision making powers

National Systems

This article also focused on the different traditional national systems for industrial relations, corporate governance and labor management. They differ in ownership structures, boards' composition and the stakeholders' relationships. For instance the German model is a dual two-tier system, insider system, stake holder approach while the Belgian model is a one tier board, with outsider management and split roles of the CEO and chair. Other systems discussed are the French model (Vienot Committees, Bouton report), Danish model, The Italian Model (Preda Code), The Dutch model (Code Peters).

Goodijk states that there corporate governance has been tending to a more universal mode, in the recent past evidenced by well defined shareholders rights, more outside directors being hired, special board committees.


The final part of this article discusses the relevance of corporate governance to the AgirE research project whose one of the theme was to establish the relations between labor management, industrial relations and corporate governance. The details were made clear by analysis of the resultant effects of different models of corporate governance and characteristics on the restructuring decision-making processes, interaction between corporate governance and internal governance and the influence of board decisions making processes.

This article had a slightly different structure with the last paragraph of the introduction acting as the abstract of the whole piece of work. Despite its location it provided sufficient representative information about this work. This piece of work has by far covered the relevant areas of concern as per the title of the article heavily dwelling on corporate governance, however labor management has not been fully exploited in context with its relations and impacts on industrial relations. A clear presentation of the impacts of the interaction of labor management with the other aspects would give this article a more dynamic approach.