Commercial Accountability & Governance

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The commercial accountability based on Dodd and Favaro’s awareness is an emerging governance and stakeholder accountability model.  Such model can be succeeded as both responses and changes by implementing processes and procedures that make certain an accountability and responsibility culture in an organization.

And so the skillful controlled of corporate governance and the ability to minimize the risk of fraud or the unethical behavior will ensure that such behaviors are exposed before irreversible damage is done to any organisations.  While the principles of corporate governance offer solid grounds for supervision and control that safeguard the framework for accountability processes and measures, certainty around innovative organisational structure of the board for the longer term will eventually add value to the business.

 

Unlike stewardship theory according to past and present academics, agency theory indicates that there is “conflict of interest” with the agency cost against the company. The Agency theory suggests excellent perceptions into information, structures outcome, uncertainty, incentive, and risk when dealing with tools lay down to reduce agency cost (Eisenhardt 1989). Evidence suggests that managers are working on good governance after the global financial crisis (GFC) to perform and to gain intrinsic satisfaction.  Their objectives stand to use responsibility and authority to gain credit from the director to maximize shareholder value (McClelland 1961; Herzberg et al. 1959; Davis et al 1997).  However, agency costs can be due to poor managerial capabilities, the main cause of agency costs was psychological related in which motivation is the focal point to follow self-interests. Thus agency theory proposes that agents and principals are motivated by opportunities for their own personal gain in place of the modern concern and risk.

 

Given that risks could include adverse selection and moral hazard for some behavioral features of traditional governance model.  Donaldson and Davis (1991) equally caution against the agency theory model of CEO role and rewards emphasizes control of managerial “opportunism” using incentives to restrict CEO interests to those of shareholders.

 

The corporate governance of stewardship theory reveals the beneficial significance on shareholder returns that combine knowledge by having title role of CEO and chair held by the same person.  The outcomes have demonstrated the protection of shareholders returns through empowering of managers who take self-governing executive action deliver some backing to stewardship theory.  Therefore, Caldwell and Karri (2005) support the superior stewardship model of governance since it takes account of the societal obligations and achieves cultures of trust.

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