Assignment on Corporate Governance of Bangladesh in Comparison with Germany

Corporate governance remains an obscure issue for business students. Most often it is amalgamated and confused with the issue of ethics. Although ethical behavior is expected from all the “actors” that take part in the corporate governance process, and specifically from directors and executives, corporate governance at its core is about the characteristics of a governing process and not about a particular behavioral trait.
The need for corporate governance arises from the potential conflicts of interest among stakeholders in the corporate structure. These conflicts of interest often arise from two main reasons. First, different stakeholders have different goals and preferences. Second, the stakeholders have imperfect information as to each other’s actions, knowledge, and preferences.

Corporate governance is an important effort to ensure accountability and responsibility and is a set of principles, which should be incorporated into every part of the organization. Though it is viewed as a recent issue, there is, in fact, nothing new about the concept. Because it has been in existence as long as the corporation itself-as long as there has been large – scale trade, reflecting the need for responsibility in the handling money and the conduct of commercial activities. In the wake of accounting, leadership, and governance scandals at such large companies as Enron, Tyco, and WorldCom, corporate governance has succeeded to attract a great deal of interest as it focuses not only the long term relationship, which has to deal with checks and balances, incentives for managers and communications between management and investors but also the transactional relationship, which involves dealing with disclosure and authority. Numerous works, studies, and researches have been conducted to enact principles, codes, and guidelines for ensuring good corporate governance systems and culture within the organizations.

Objectives of the Study

The broad objective of the research is to understand the state of corporate governance in Public limited companies - Financial and Non-Financial institutions and State Owned Enterprises in Bangladesh and the developed countries such as EU countries, USA, Canada etc. In particular, the study is expected to know the followings:

1) To introduce what corporate governance really entails.
2) To point out how corporate governance is the result of certain realities; shareholding patterns, economic and legal environments, cultural idiosyncrasies.
3) To sketch the key characteristics of the corporate governance models in use across the EU, US and in Bangladesh.
4) To explore how executive compensation is also an element that is influenced by the governance model in use.
5) The current practice of corporate governance in terms of accountability to its stakeholders.
6) How far the current practice of corporate governance passes the test of fairness.
7 Whether corporate governance system in Bangladesh is transparent for all stakeholders in comparison with developed countries.

Corporate governance refers mainly to the organization of the relationship between the owners and managers of a corporation. The ways in which countries structure this relationship take different forms across the globe, reflecting different economic circumstances and national traditions. Corporate governance systems must be seen and understood in the context of the societies in which they function. Much conventional wisdom circulates on the characteristics of national systems, but it is not always supported by empirical evidence.
Different authors view the meaning of corporate governance differently. For example, one school of thought describe corporate governance as a “system” by which companies are directed and controlled (Cadbury and Greenbury); another school views corporate governance as “structures and processes for decision making, accountability, control and behavior at the governing body” (Public accounts and Estimates Committee, 2002); to others corporate governance is about “finding ways” to ensure effective decision making (Pound 1995). But it must be kept in our mind that the fundamental concern of corporate governance is to ensure the conditions whereby a firm’s directors and mangers are held accountable, ensure better and effective protection to all stakeholders. The World Bank argues that the framework of corporate governance should be based on four “pillars” – of Responsibility, Accountability, Fairness and Transparency. However, Kocourek (2003) believes that to counter the accounting, leadership, and governance scandals, organizations are rushing to institutionalize corporate governance, which may be even be counterproductive. The drive to more tightly regulate the membership and functions of corporate boards is already encouraging companies to view governance as a legal challenge rather than a way to improve performance.
So Corporate governance is the framework of laws, rules, and procedures that regulate the interactions and relationships between the providers of capital (owners), the governing body (the board or boards in the two-tier system), seniors managers and other parties that take part to varying degrees in the decision making process and are impacted by the company’s dispositions and business activities. Corporate governance defines their respective roles and responsibilities and their influence in steering the course of the company.