The focus on corporate governance arises out of the large dependencies of companies on financial markets as the preeminent source of capital. The quality of corporate governance shapes the future and the growth of the capital market. Strongcorporate governance is indispensable to resilient and vibrant capital market. In thecontext of globalization, capital is likely to flow to markets which are well regulated and practice high standards of transparency, efficiency and integrity.
BENEFITS OF CORPORATE GOVERNANCE:
Good governance leads to congruence of interests of boards, managementincluding owner managers and shareholders.
Good governance provides stability and growth to the company.
Good governance system builds confidence among investors.
Good governance reduces perceived risks, consequently reducing cost of capital.
Well governed companies enthuse employees to acquire and develop companyspecific skills.
Adoption of good corporate governance practices promotes stability and longterm sustenance of stakeholders relationship.
Potential stakeholders aspire to enter into relationships with enterprises whosegovernance credentials are exemplary.
Normative Theory of Corporate Governance:
In the context of globalization of operations of corporations and integration of financial markets, the question whether any universal normative principles can be laiddown has assumed significance since corporate governance provisions and practicesdiffer from country to country. The basis for universal normative standards on corporategovernance is to be found in the German critical theory which elaborated a welldeveloped normative ethical theory.2