Corporate communication and corporate governance

Résumé du document

As financial institutions play an important role in the economic activity, they assume central place in this context. The financial crisis has revealed different issues that have been hidden within our societies. Evidently, societies have underlined the practices of finance, and sometimes denounce abuses in this area. Besides, the financial turmoil has highlighted issues in corporate governance that appeared before and still remains at this moment. In this way, corporate governance and finance are linked by some common issues. The aim of this paper is to analyze the corporate governance inside financial institutions, and to examine the issues in corporate governance in the banking system in order to find solutions on this theme. Corporate governance is concerned with the regulation, supervision, or performance and oversight of the corporation. There are two patterns that stand out distinctly in this context which are the shareholder theory and the stakeholder theory.

Extraits

[...] Corporate governance The modern definition of corporate governance is the framework of rules established by the board of directors. This framework consists of explicit and implicit contracts between the firm and the stakeholders for distribution of responsibilities, rights and rewards, procedures for reconciling the sometimes conflicting interests of stakeholders in accordance of duties, privileges, and roles, and procedures for proper supervision, control, and information flows to serve as a system of checks- and-balances. The role of the board Garrat (1997) defined what the functions of the board as a collective responsibility are as below: Plan Decide the strategy (the direction) Report and make recommendations to stockholders Determine the company values and its ethical behavior Monitor and control managers and CEO In order to understand better why financial institutions and more deeply how their corporate governance are involved in the financial turmoil nowadays, it should be explained how corporate governance is ruled, and what are the different models in corporate governance practices to get finally what are the problems and issues underlined by the financial crisis in order to find what could be the solutions facing these dilemmas. [...]

[...] The audit part should be directed by audit companies, as they could have a better critical sense on the way the corporate is governed and on the financial way. Even if historically, we could see that having an external audit service is not synonym as fraud reducing, some efforts could be done on this theme in order to have a better assessment from audit companies. Disclosing board members remuneration As Myners review stated for the governance of life mutuals, financial institutions should publish a directors' remuneration report which will certainly reduce opportunistic behavior from the CEO and board members. [...]

[...] Islam) Global corporate governance: debates and challenges (Malla Praven Bhasa) Corporate governance and corporate failure: a survival analysis (Susan Parker, Gary F. Peters and Howard F. Turestky) Enhancing corporate for financial institutions: the role of international standards (K. Alexander and R. [...]

[...] Consequently, mathematically they can evaluate what time a board member has to spend in each board to maximize performance results. The mathematical model dealing with the CEO's performance is based on his past performance, and the model underlines that the CEO is new, the estimate of his ability is low. He requires more monitoring than old CEOs, since less is known about his ability. Similarly, CEO's ability is expressed as an estimate of the probability of successful performance, as a function of the degree of monitoring by the director, measured by a control of visits. [...]

[...] Nevertheless, the principal-agent theory looks upon the issue of corporate governance as self-interested managerial behavior in this relationship. If the agent does not share the same goals and the same objectives than the shareholder it could arise agency problems. As it has been mentioned above dealing with the separation between ownership and control, if this separation tends to be high, the power of managers becomes higher and they would be able to be free to act for their proper interests at the expense of shareholders. [...]