‘Corporate Governance is a term thought up by someone who tried to run a business but couldn’t do it!’

Running head : Corporate Governance : Difference between U .K and U .S perspective

Corporate Governance : Difference between U .K and U .S perspective

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The new era of globalise businesses and increased awareness in the stakeholders have given importance to the notion of Corporate Governance (Levitt , 1992 . The execution of the notion will have important consequences for investors , companies , and , critically , for the stock and other financial markets of UK . With the increasing globalisation when every country can be seen as an opportunity for the investors the

br lack of understanding of effective corporate governance can adversely effect the investment intentions of investors (Lommis , 1999

Nowadays corporate governance is seen as the key of attracting investors . Capital flow seems directed towards the companies , which practice fair and transparent ways of governing their organisations With the changing global business scenario the need of understanding and effective practise of fair and technologically advance corporate governance has also increased (Cohen et al , 2002

ICAEW (2002 ) has explained corporate governance in a very effective and comprehensive manner as Corporate governance is commonly referred to as a system by which organisations are directed and controlled . It is the process by which company objectives are established , achieved and monitored . Corporate governance is concerned with the relationships and responsibilities between the board , management , shareholders and other relevant stakeholders within a legal and regulatory framework

Sir Adrian Cadbury (1992 ) defined corporate governance as `the whole system of controls , both financial and otherwise , by which a company is directed and controlled

There are no hard and fast rules for corporate governance , which can be prescribed for all the countries . These rules can be different for different countries according to their needs and cultural settings According to ICAEW (2002 ) with all the contrasts present in the rules and regulations of different countries emphasis is given to generic corporate governance principles of responsibility , accountability transparency and fairness

Responsibility of directors who approve the strategic direction of the organisation within a framework of prudent controls and who employ monitor and reward management

Accountability of the board to shareholders who have the right to receive information on the financial stewardship of their investment and exercise power to reward or remove the directors entrusted to run the company (Lracker et al , 2004 . The disclosure of financial and operational information and internal processes of management oversight and control enable outsiders to understand the organisation

Fairness that all shareholders are treated equally and have the opportunity for redress for violation of their rights . According to Meigs et al (1999 ) this information meets the needs of users of the information-investors . Creditors , managers , and so on-and support many kinds of financial decision performance evaluation and capital allocation , among others (P .07

Owen (2001 ) traces the history of the structure of the British financial system that was shaped by the form which industrialisation took in the 18th and 19th centuries

Following legislative changes in mid-century - principally the Joint Stock

Companies Act of 1844 and the...