Corporate Governance: A Theoretical Review

Abstract

The aim of this paper is to review selected theories of corporate governance. The theories reviewed include the following: Agency Theory; Stewardship Theory; Stakeholder Theory; and Resource-Dependency Theory. The research methodology is anchored on critical narrative literature review which is popularly known as traditional literature review. The review concludes that for the several years, the Agency theory has been one of the major microeconomic trends. It has been applied to banking, industry and the work economy and has been the basis of the economic reward model. For instance, incentives, risk, and employee selection are studied by the Agency. Further, it is concluded that the stewardship theory expresses that stewards ensure and augment investor riches through organization performance. Stewards are corporate chiefs and directors who work for investors and furnish investors with insurance and benefit. Furthermore, it is determined that the nature of Stakeholder theory lies in assumption that the company is a stakeholder system, and these stakeholders operate in a broader system in which each stakeholder and the entire society provide the laws and market infrastructure to allow the company's activities and capabilities to create wealth and shareholder value. In respect of the Resource-Dependent Theory (RDT), it is concluded that Resource dependence theory is concerned with power relations. It analyzes how managers deal with parties that have power over the company because they control resources that the firm needs to operate

Keywords: Corporate Governance Theories; Agency Theory; Stewardship Theory; Stakeholder Theory; Resource-Dependency Theory (RDT).

DOI: 10.7176/EJBM/15-16-08

Publication date:September 30^th 2023