Corporate Governance and the Firm’s Performance: A Managerial Perspective

Abstract

Corporate governance is a system where owners of a corporation have absolutely no direct power to have a control a company whereas others i.e. directors and managers who possess no shareholding or ownership are the ones that run the corporations but are appointed by the shareholders indirectly through electoral process. This system gained negative popularity when two giant companies (Enron Xerox and Worldcom) shocked their shareholders through different illegal means. Moreover, literature suggests that there are other several examples as well in the world that highlights the problems in this form of governance mechanism. Considering the importance of this issue the study has conceptualized to explore the main issues of corporate governance exists in Pakistani scenario. It is also worth mentioning here that many prior researches are mainly focused on the role of corporate governance in enhancing financial performance of the corporations. This research is significance in two ways, first, it is focused primarily on the effects of corporate governance mechanism on management of corporations, secondly, thematic approach has been used to understand the governance system along with the issues exist and no secondary data taken to check the effects on financial growth of corporations. The top management of several corporations was interviewed in the study to understand the governance and issues exists in the country. It has been observed that many of the issues that are discussed in the literature are same whereas some new and interesting findings are also come out due to several factors e.g. work ethics, culture, family businesses etc. Finally, the study also suggests ways to improve governance mechanism especially in Pakistani environment. The results may be interesting if  future researchers step in this field and explore the field by various dimensions e.g. by adding shareholder’s perspective, incorporating creditors and taking views of the regulators.

Keywords: Corporate Governance, Governance Mechanism, Financial Performance, Family Businesses