Corporate governance approaches Essay Example | Topics and Well Written Essays - 750 words

Corporate governance approaches - Essay Example Due to the many reported business failures, combined with the low profits generated, the credibility and efficiency of corporate structures has been doubted thus the need to assess the accountability and responsibility of such leadership. This kind of system is based on the assumption that the holders of wealth or those who have exclusively invested capital in the business own it. That means the owners are entitled to the profits accruing from the enterprise since they have put their money at risk. In the case, the shareholders manage and control the activities and values in the organization at sometimes the expense of workers, customers and the public interests for instance, in the case of job outsourcing and the tax evasion experienced by the firms. This system of governance puts together all the parties that contribute to the success of the enterprise by recognizing and empowering such parties. It includes not only the owners but also other players such as the managers, suppliers, customers, distributors, employees and the public (Appleyard, Alfred and Steven 261). The system is actually consumer, suppliers and employees oriented. The stakeholders are included in the board of governors and play an active role in the policy making process The main distinguishing figure between the two systems of capitalism is in the approach to the type of environment in which firms develop including the labor and capital. Under stakeholder capitalism, the total reward system of remuneration is used and support towards productivity through education, training and research is accorded. Labor is secured through promotion of employer relationship thus low turnover rates at work making the labor market to be less flexible. Shareholder capitalism, on the other hand, puts a lot of weight and priority to shareholders interests. This cause labor mismanagement and also reduces the return to labor. There is too much external and internal