Edited by Jonathan P. Doh and Stephen A. Stumpf
Chapter 13: Management, Governance and Corporate Responsibility
Shawn D. Howton, Shelly W. Howton and Victoria B. McWilliams Introduction Corporate governance is currently one of the hottest topics of discussion in business. Studies of corporate governance and its impact on both an organization and a society appear regularly in top academic journals across all business disciplines. Articles appear almost daily in the popular press reporting accusations of scandals and fraud perpetrated by managers and members of a ﬁrm’s board of directors. The government is also becoming more involved in corporate governance as evidenced by the passage of the Sarbanes–Oxley Act of 2002, the purpose of which is ‘To protect investors by improving the accuracy and reliability of corporate disclosures made pursuant to the securities laws, and for other purposes’ (Sarbanes-Oxley Act of 2002, 1). Although the increased publicity of corporate scandals in the late 1990s and early 2000s has brought new attention to corporate governance, its importance to the ﬁrm has been widely studied across the business disciplines. An early theoretical paper by Jensen and Meckling (1976) on agency theory is a common starting point for examining the issues surrounding corporate governance. Jensen and Meckling (ibid., p. 308) describe an agency relationship as ‘a contract under which one or more persons (the principal(s)) engage another person (the agent) to perform some service on their behalf which involves delegating some decision-making authority to the agent’. Agency theory is used to examine corporate governance issues by focusing on the shareholders of the ﬁrm as principals and managers as...
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