In case of business, Corporate Governance is a new era. It has potential scope to find it useful though it hasn't actually been evolved from one theory. Many theories from different disciplinary area contributed to develop fundamental of corporate governance.

1. Development of
Corporate Governance

2. Overview
≥ Factors Shaping Corporate Governance
≥ Theories affecting Corporate Governance
≥ Agency Theory
≥ Theory of Transaction Cost Economics
≥ Stakeholder Theory
≥ Stewardship Theory
≥ Class Hegemony & Managerial hegemony
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3. Factors Responsible Shaping Corporate Governance
Theories from
Disciplines
• Finance
• Economics
• Accounting
• Law
• Management
• Organizational
Behavior
Business
Form
Legal
Character
Cultural
Character
Actors Role
Play
• Director
• Shareholder
• Stakeholder
Corporate
Governance
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4. Corporate
Governance
Agency
Stewardship
Class
Hegemony
Transaction
cost
economics
Stakeholder
Managerial
hegemony
Theories
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5. Agency Theory
≡ Important Work - Jensen and Meckling (1976), Fama and Jensen 1983
≡ Principal-Agent Framework (Two Party)
≡ Sets Agency Relations
≡ One Party Plays the role of Principal
≡ Other Party perform delegated work
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6. Theory of Transaction Cost Economics
⁞ Williamson illustrated TCE theory (1975, 1984) also shaped by Coase
(1937)
⁞ Closely related to Agency Theory
⁞ Simply, TEC is When someone else do something for you .e.g. directors
to run the business you own costs will arise
⁞ Undertake transactions internally rather than externally
⁞ Views as Governance Structure. It is necessary for misaligning actions
⁞ Governance is a mechanism for making decisions in the initial contract.
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7. Stakeholder Theory
≡ Focuses on Wide group of constituents
≡ Overrides focus of shareholder value, makes it self-evident
≡ Represents directly stakeholder groups
≡ Stakeholders trade off against interest is not defined, which creates
accountability problem & no objectives to measure
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8. Stewardship Theory
⁞ Donaldson and Davis 1991
⁞ Alternate to agency Theory
⁞ Not placing management under control of owner
⁞ Empower managers to take executive action
⁞ They will act best in the interest of shareholders
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9. Class Hegemony & Managerial hegemony
Class Hegemony
 Director view themselves as an elite
 Appoints new director taking account how might he/she fit into elite
 Sometime Override knowledge, experiences and skills
Managerial hegemony
 Management have update knowledge about operation
 They Dominate Director
 Influence decision making
 Make directors completely depending on them
 Weakens directors influence and decision making
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10. The End
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