Origin of CG

In last few centuries, the world has made a remarkable transition from entrepreneurial innovation, achieving management orientation and moving towards good governance.

The great trading companies in the past, had the patronage of the monarch. Today financial institutions worldwide invest significantly in companies globally. These companies are accountable to the corporate power. The notion of the corporate accountability can be vindicated only if corporate power is properly exercised and unfortunately corporate power is invariably abused.

The classical concept of the company stems from legislation developed in the mid-nineteenth century. The key concept was incorporated of a legal entity, and the owners liability for the company debts was limited to their equity investment. Yet ownership remained the basis of power.

In the early 20th century the shares of many public companies were listed and traded on stock exchanges. Berle and means drew attention to the growing separation of power between the executive management of major public companies and their increasingly diverse and remote shareholders.

In 1972 Pfeiffer drew attention to the importance of the link between organization, environment and board power. The other notable developments in the 1970s were emphasising independent directors (us), two-tier boards in Europe, and debate on stakeholder notions. The role of the audit committee became increasingly important.

In 1970s saw questioning the role of the corporation in society. The view was that public corporations have a responsibility beyond their legal duty to their shareholders. The company boards should be accountable to the shareholders. The scholars in America and Britain debated the emerging role of Modern Corporation in the 1980’s, research into the corporate government identified further themes.

In the 1990’s major institutional investors became active in corporate governance. The role of fund managers in USA and UK became active. In the UK corporate governance reforms were introduced after the Cadbury committee, which focused on the role of independent directors, audit committees, among other. Subsequent to the Cadbury report may other countries adopt corporate governance reforms, the OECD and the World Bank issued codes, and guidelines.


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