Corporate governance and ethics: Corporate governance along a firm´s life cycle.

Governance over the life cycle of a company.

A theme in governance - Followed by regulators and academics - is agency theory, which considers the differences in motivation between principals (shareholders) and their agents (executives).

• The development of the agency relationship as ownership changes over the life cycle.
• In each stage, the company will also have funding from lenders with the protection of these lenders ’ positions are also an aspect of governance to consider
• Given that the cost of funding reflects the investor’s or lender’s perceived risk, one important function of corporate governance is to reduce this.
• With mechanisms of risk reduction can broadly be categorized as ‘monitoring’ or ‘control’.
  – Monitoring involves the disclosure of information by the company to the stakeholder, which allows that stakeholder to evaluate management’s activities.
  – Control gives the stakeholder the ability to prevent management from undertaking certain activities or oblige them to take others.