Page 4 - FINAL CFA SLIDES DECEMBER 2018 DAY 11
P. 4
LOS 34.a: Session Unit 10:
Describe corporate governance, p.1 34. Corporate Governance and ESG: An Introduction
“framework or system of internal controls and procedures by which individual companies are
managed. It defines:
• the rights, roles and responsibilities of various groups within an organization.
• The checks, balances, and incentives required to minimize and manage the conflicting interests
between insiders and external shareowners.”
tanties
2 perspectives to corporate governance,
Narrow and Broad:
Shareholder theory – paramount is Stakeholder theory considers
interests of common shareholders conflicts among the several
(value maximisation); it focuses on stakeholder groups: shareholders,
agency problem: conflicts between employees, suppliers, and
the managers and its owners customers, among others.
(shareholders) dye to information
asymmetry.
