Corporate governance is defined, described or delineated in diverse ways, depending on the writer's purpose. Writers focused on a disciplinary interest or context (such as accounting, finance, law, or management) often adopt narrow definitions that appear purpose-specific. Writers concerned with regulatory policy in relation to corporate governance practices often use broader structural descriptions. A broad (meta) definition that encompasses many adopted definitions is “Corporate governance” describes the processes, structures, and mechanisms that influence the control and direction of corporations.”
Separation of Chief Executive Officer and Chairman of the Board roles
Shareholders elect a board of directors, who in turn hire a chief executive officer (CEO) to lead management. The primary responsibility of the board relates to the selection and retention of the CEO. However, in many U.S. corporations the CEO and chairman of the board roles are held by the same person. This creates an inherent conflict of interest between management and the board.
Critics of combined roles argue the two roles that should be separated to avoid the conflict of interest and more easily enable a poorly performing CEO to be replaced. Warren Buffett wrote in 2014: “In my service on the boards of nineteen public companies, however, I've seen how hard it is to replace a mediocre CEO if that person is also Chairman. (The deed usually gets done, but almost always very late.)”
Sub topics
Agency cost
Basel II
Co-determination
Worker representation on corporate boards of directors
Corporate Law Economic Reform Program Act 2004
Corporate social entrepreneurship
Corporate transparency
Creative accounting
Earnings management
Environmental, social and corporate governance
Fund governance
Golden parachute
International Organization of Supreme Audit Institutions
King Report on Corporate Governance
Legal origins theory
Market socialism
Outrage constraint
Private benefits of control
Risk management
Social ownership
Sociocracy
Stakeholder theory