In the past few years, the concept of “corporate governance” has emerged as an attractive trend for the business organisations. It offers a wide variety of advantages and opportunities to business organisations that help them deal with various challenges. There has been an increasing interest in Corporate Governance since the 1990s arising from the major collapses of giant corporations and the privatisation of the public sector in the United Kingdom and the increased importance of globalisation (Dreher et al., 2008, P. 2) and (Vickers & Yarrow, 1991). This interest has been in parallel with many significant developments in Corporate Governance practices worldwide in response to these corporate and financial crises and in particular, the 2007 global financial crisis. There are various concepts of Corporate Governance depending on the time of the definition, the country's legal system and the country’s economic culture. Despite the different definitions of Corporate Governance, each shares a common element which is that Corporate Governance is a set of mechanisms which arranges the relationship between the firm’s management, its shareholders and other stakeholders. For example, according to the Cadbury Code of Corporate Governance (1992, p. 4), corporate governance can be defined as “the system by which companies are directed and controlled”.
Aguilera (2005) defines corporate governance as the distribution of rights and responsibilities among the different parties involved in the corporate organization, where the corporate organization is a social system with pluralist interests and common objectives. Additionally, Aguilera and Cuervo-Cazurra define codes of good governance as a set of best practice recommendations toward the mannerisms and the organization of the board of directors (Aguilera, & Cuervo-Cazurra, 2009). Aguilera and Jackson note that a broad definition of corporate governance would be “the study of power and influence over decision making within the corporation” (Aguilera, & Jackson, 2010). Also, Aguilera et al. (2008) note that corporate governance relates to the organization of rights and responsibilities among parties with shares in the firm and that this governance uses techniques to ensure that executives respect the interests of the shareholders and that the shareholders act responsibly toward the wealth invested in the firm (Aguilera et al., 2008); (Aguilera, & Jackson, 2003); (Aguilera, Florackis, & Kim, 2016).
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Filatotchev and Boyd define corporate governance the same way as Aguilera et al. (2008) but provide a broad definition that it is about governance that ensures the effective and efficient running of firms (Filatotchev, & Boyd, 2009). Filatotchev et al. (2013) argue that top managers’ interests and those of shareholders should be aligned. From this perspective, they define corporate governance as the organizational practices that monitor and restrain managerial discretion (Filatotchev, Jackson, & Nakajima, 2013). Corporate governance may also be described as regulations designed to ensure a structure that underpins the relationship between a firm and stakeholders who may have financial claims against it (Filatotchev et al, 2007).
An alternative definition may be provided by Judge et al. (2008) who argue that corporate governance refers to a route through which a nations channels corporate influence for the fair and efficient distribution of wealth in a national economy (Judge et al., 2008). Although La Porta et al. do not define corporate governance, they note that the effectiveness of a financial system can be traced to the protection of the investor against expropriation by insiders (La Porta et al., 2012). When the laws protective and enforced, the financial markets are wider and more valuable (La Porta et al., 2002).
On the other hand, Raut, (2018) and Khan, (2011) define corporate governance in a broad sense as a process through which organisations assign business resources in a way that makes the most of value for all the associated business stakeholders, such as, investors, shareholders, customers, employees, environment, suppliers and the public at large and grips those at the controls to make them accountable by assessing their decisions and judgements on inclusivity, transparency, equity and accountability (Raut, 2018; Khan, 2011). Also, La Portal et al. (2000), introduced Corporate Governance as a set of mechanisms which the firm’s external stakeholders could use to protect their interests and the rights of internal stakeholders such as the board of directors and shareholders. Furthermore, the Organisation for Economic Co-operation and Development (OECD, 2004, p. 11) defines corporate governance as follows: " Corporate governance involves a set of relationships between a company’s management, its board, its shareholders and other stakeholders. Corporate governance provides the structure through which the objectives of the company are set, and the means of attaining those objectives and monitoring performance are determined. Good corporate governance should provide proper incentives for the board and management to pursue objectives that are in the interest of the company and its shareholders and should facilitate effective monitoring ”. However, despite the fact that these definitions can identify some essential elements of Corporate Governance, the general definitions remain vague. Perhaps, one of the clearer definitions is the one provided by Solomon (2007) that Corporate Governance is a set of mechanisms used to manage and control organisations in order to provide effective internal control systems and risk management. This study discusses the concept of corporate governance in the context of a specific country ‘Kuwait’ and the trend from Kuwait’s perspective (Alqatan, 2019).
It is an admitted fact that corporate governance is believed to be an effective tool for addressing business issues by allowing all the business stakeholders to take into a part in the resolution. Despite the fact that corporate governance can play a critical role in the development of an organisation, its performance, and its earnings management, and regardless of the ever-increasing value of corporate governance in all the areas of the world, the acceptance and implementation of this model is immature in Kuwait (Capital Standards, 2010; Al-Saidi & Al-Shammari, 2014). Aguilera, R. V. (2005). Corporate governance and director accountability: An institutional comparative perspective. British Journal of Management , 16, S39-S53.
References
Aguilera, R. V., & Cuervo-Cazurra, A. (2009). Codes of Good Governance. Corporate Governance: An International Review, 17 (3), 376-387.
Aguilera, R. V., & Jackson, G. (2010). Comparative and international corporate governance. The Academy of Management Annals, 4 (1), 485-556.
Aguilera, R. V., Filatotchev, I., Gospel, H., & Jackson, G. (2008). An organizational approach to comparative corporate governance: Costs, contingencies, and complementarities. Organization Science, 19 (3), 475-492.
Aguilera, R., & Jackson, G. (2003). The Cross-National Diversity of Corporate Governance: Dimensions and Determinants. Academy of Management Review, 28 (3), 447-465.
Aguilera, R., Florackis, C., & Kim, H. (2016). Advancing the Corporate Governance Research Agenda. Corporate Governance: An International Review, 24 (3), 172-180.
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Filatotchev, I., & Boyd, B. (2009). Taking Stock of Corporate Governance Research while Looking to the Future. Corporate Governance: An International Review, 17 (3), 257- 265.
Filatotchev, I., Jackson, G., & Nakajima, C. (2013). Corporate governance and national institutions: A review and emerging research agenda. Asia Pacific Journal of Management, 30 (4), 965-986.
Filatotchev, I., Jackson, G., Gospel, H., & Allcock, D. (2007). Key drivers of'good'corporate governance and the appropriateness of UK policy responses: Report to the Department of Trade and Industry.
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