Advantages and Disadvantages of regulatory led corporate

Document Type:Research Paper

Subject Area:Business

Document 1

Some of the advantages of the regulatory led corporates include the following: For instance, this system of corporate governance ensures that the right of minority shareholder are well protected. This is because there are a number of set regulatory provisions that allow the minority shareholders to be able to participate in the governance structure and their voting rights are also safeguarded. Another advantage of the regulatory led corporates is that there is separation of the decision department from the decision control. This is an indication that strategy debate is managed by the management but the board remains in charge of all the approvals so as to allow the finalization of the strategic decisions (Griffith& Sean, pg 57). This separation of duties ensures that there is no monopolization of decision making process.

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For instance, this system of governance concentrates power in on single individual. For instance, most of the companies have the CEOs serving as the chairman of the board thus he or she is vested with a very high deal of power which might put the company risk. In this system of corporate governance, there is independence loss. This happens because the presence of the non-executive directors in real sense is rendered powerless in that these directors are influenced by individuals like the CEO in the decision making process. Therefore, because they are capable of being influenced it means that they are not independent when it comes to the process of making decisions. This happens because the member companies have the option of explaining their reason against giving consent to any given provisions.

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Comply or explain approach also provides corporation with prolonged learning where it aides cultural changes in corporates by encouraging and showing them means of achieving the purpose and the principles of the corporate governance. Additionally the corporate and government are able to benefit from the strong and visible corporate practices offered by this form of governance thus making countries like UK to be able to attract more investors to invest in their stock market. Comply or explain method also allows room for the maximization of the companies` full benefits that they gain from being listed publicly since they are given the chance of expanding internationally following the publication of their stock. Comply or explain method is also effective in that it protects the welfare of small companies and the shareholder since it requires the directors to be aware of the shareholder problems as well as their issues, an act that makes comply or explain method to be effective(Griffith& Sean, pg 6a7).

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