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Corporate Governance

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  • Essay length: 2696 words
  • Submitted: 19/06/2010
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University Degree Human Resource Management

The first 200 words of this essay...

2. 'When they were put to the test, corporate governance routines did not serve their purpose to safeguard against excessive risk taking.... the risk management systems have failed in many cases due to corporate governance procedures rather than inadequacy of [complex financial] computer models alone."

With reference to the one of the theoretical models of the corporation you have studied consider:

a) What, if any, are the legal obligations of directors of Australian companies generally to safeguard their company against excessive risk taking?

The primary responsibility of the board of directors is to protect the shareholders' assets and ensure they receive a reasonable return on their investment at a given risk appetite. This is however, rarely the case. Directors are most likely to engage in excessive risk taking1 (Adler) to further their own personal interest and incentives at the expense of the company and its' stakeholders.

Contractarian theory revolves around the notion that the corporation is deconstructed to reveal no more than a "nexus of contracting relationships" between managers, shareholders and other stakeholders.2 Its core innovation was to conceptualise the relationship between management and shareholders of a public company as a

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