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Development of corporate governance

Influences

1.1 Influences on corporate governance

Governance theory concludes that there are two major factors affecting organisational
operation:

 Agency theory – leads to shareholder pressure and shareholder activism.

 Stakeholder theory – leads to stakeholder lobbying and concerns over social
responsibility.

In addition:

 company law provides a framework within which operations occur

 audit and auditors impact on governance and are covered in depth in internal
control and risk sections of the syllabus

 codes of governance are developed by government, operate as a prerequisite
to membership of stock exchanges, maybe grounded in legislation, and guide
individual professional bodies.

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