ACCT 605
Contemporary Issues in Financial Accounting

1. Introduction

The amount of corporate governance research has increased remarkably during the last decade.  Corporate governance becomes a hot topic in recent years. Corporate governance is a rule-based and voluntary in most countries but still been widely used in companies. Therefore, it has been recognised as significant element in managing companies in modern global phenomenon.
 
Corporate governance has been recognised as significant element in managing corporations in modern global phenomenon. It includes quite numbers theories. Good corporate governance will bring a good performance of the company. Therefore, this paper will show a briefly idea about corporate governance from the history, definition, theories and accounting perspective.
 
The paper proceeds with corporate governance overview in section 2. Section 3 provides the theories of corporate governance. Section 4 discusses the current status on corporate governance from worldwide and New Zealand point of view, Section 5 offers the relationship between corporate governance and accounting and concludes.
 

2. Corporate Governance Overview

In order to begin the discussion the following sections on corporate governance and the relationship with accounting, a definition and basic understanding is needed. Corporate governance refers to the way in which companies are governed, and to what purpose. It is concerned with practices and procedures for trying to ensure that a company is run in such a way that it achieves its objectives. An early definition of corporate governance could be found in the Cadbury Report in 1992; ‘Corporate governance is the system by which companies are directed and controlled. Boards of directors are responsible for the governance of their companies. The shareholders’ role in governance is to appoint the directors and the auditors and satisfy themselves that the appropriate governance structure is in place’.
Lately,   corporate governance has been comprehensively defined as
‘A system of law and sound approaches by which corporations are directed and controlled focusing on the internal and external corporate structures with the intention of monitoring the actions of management and directors and thereby mitigating agency risks which may stem from the misdeeds of corporate officers.’ (Sifuna, Anazett, 2012)
 
 

3. Theories Associated with Corporate Governance

Corporate governance includes quite number theories. It is useful to consider the theoretical justification for a system of rules or guidelines on corporate governance. In this section, we just have look four different theories which are:

1. Agency theory
2. Stakeholder theory
3. Stewardship theory
4. Institutional theory.

 
3.1 Agency Theory
Agency theory became the dominant force in the theoretical understanding of corporate governance (Phong, 2012). However cover all aspects of corporate governance.
 
In 1970s, agency theory was developed by Michael C. Jensen and William H. Meckling. Agency theory is based on the separation of the ownership of a company and control over the company’s actions.
3.2 Stakeholder theory
3.3 Stewardship theory
3.4 Institutional theory
 

4. Current Status on Corporate Governance
   4. Worldwide
   4. New Zealand

 

5. The Relationship between Corporate Governance and Accounting

 

6. Conclusion

 

7. References