Corporate Governance Models Essay Example | Topics and Well Written Essays - 500 words

Corporate Governance Models - Essay Example The essay "Corporate Governance Models" presents the comparison of the two models of corporate governance: Shareholder value and Stakeholder. The shareholder value is designed in such a way that the only the shareholders and executives will earn high returns on the stocks they have invested. As seen above, the shareholder value focuses wholly on the shareholders and ignores the other stakeholders of the company such as employees, suppliers, and customers. As the time passed and new developments came about in corporate governance, the theory underlying the shareholder value model changed to a certain extent but the theory is still followed as the new theory "The Stakeholder Model" are yet fully developed. But this model keeps in view all the stakeholders related to the company especially the employees. Under the shareholder model, it is believed that as the management is focused on one objective of maximizing shareholders’ wealth, the strategies are planned in that direction an d ultimately increases the total wealth of the firm. Thus, everyone in the firm can get a bigger share of the pie if the pie is large. Therefore this model does not believe in transferring the rights of voting and cash-flows to the employees. A principle of proportional ownership has being identified by the EC as an important factor that could reform the internal markets. It is ‘one share, one vote’ rule which seeks to strengthen the shareholder rights and thus weakening the protection of the employees.