External control in corporate governance refers to rules and regulations outside a company that influence its actions. This includes tax laws, leases that restrict office space usage, and anti-discrimination hiring laws. External auditors also play a role in monitoring companies. There are three main external control mechanisms: the market for corporate control, legal/regulatory systems, and product/factor markets. External influences come from statutes, audits, competition, and shareholder/financing agreements. External control aims to ensure company behavior aligns with organizational interests through administrative policies, cultural norms, and market/regulatory forces.

1. CORPORATE GOVERNANCE
IN ASIA (GMGG 5314):
EXTERNAL CONTROL
IN ORGANIZATION
Present by :
Raja Abumanshur Matridi
(810083)

2. Definition
Corporate governance refers to the
system through which the behaviour of a
company is monitored and controlled.
(Stephen Y.L. Cheung and Bob Y. Chan,
2004)
Controlling is the process of measuring
performance and taking action to ensure
desired results (Schermerhorn, 2011)

3. Definition
Control consists of verifying whether
everything occurs in conformity with the
plan adopted, the instructions issued, and
principles established. It‘s object is to
point out weaknesses and errors in order
to rectify them and prevent recurrence
(Fayol :1949)

4. Continue...
External control includes any rule or regulation
which has an effect on the actions of the
company, and can include tax laws enacted by
the government which affect the flow of money,
a lease which restricts what a company can or
can not do with their office space, and laws
which prevent discrimination in the company's
hiring procedure.

5. External Auditor
Role of External Auditor
Other organizations had fully outsourced the
financial audit to external auditors (Paape, 2007)
One measure which could contribute to
corporate governance efforts in addressing the
agency problem is the external auditor’s
involvement (Marianne, 2009)

6. External Control
Jensen (Waymire, 2008) There are three
External Control mechanisms :
1.Market for corporate control
2.Legal, political, regulatory system and
3.Product and factor market

7. External Control
External Influencers (Jeffery K. Mitchell)
as follows :
Statutes
Audits (Financial, Operations)
Competition/Market
Agreements
•Shareholders Agreement
•Financing Agreements
•Customer/Strategic Partner Agreements

8. External Control
schermerthon (2011) External Control include
as follows :
1.Bereaucratic or administrative control (
2.Clan or normative control
3.Market or regulatory control

9. External Control
1. Bereaucratic or administrative control
uses authority, policies, prosedures, job
description, budgets, and day to day
supervision to make sure that behavior is
consistent with organizational interests

10. External Control
2. Clan or normative control
influences behavior through norms and
expectations set by organizational
culture.
sometimes called normative control it
harness the power of group
cohesiveness and collective identity

11. External Control
3. Market or regulatory control
influence of market competition on the
behavior of organizations and their members.
Business firms show the influence of market
control in the way that they adjust product,
pricing, promotions and other practices in
response to customer feddback and what
competitors are doing.

12. Capital Market
Company control occurs via numerous channels
both from within and from outside like the
capital and commodity markets .
external control via the capital markets became
increasingly stronger due to deregulation and
the revolution in information technology
(Pellervo. 2000)

13. Figure of External Control
Market for corporate market :
capital markets, market
competition, product market,
customer and comodity market.
the role of environmental
Government : influences :
Regulation or Statutory, the media pressure, the
Deredulation, bureaucracy revolution in information
technology, and electronic
media
External Control
in Organization
(Corporate
Governance)

14. CORPORATE GOVERNANCE IN ASIA
(GMGG 5314):
EXTERNAL CONTROL IN ORGANIZATION
Thank you