Theories of CG

Theories of Corporate Governance -

Agency Theory:

Explanation: Imagine you own a company but you hire someone else to run it for you. The problem is, they might not always work in your best interest. Agency theory is about making sure they do what's best for you, the owner, instead of just doing what's best for them.

Stewardship Theory:

Explanation: Stewardship theory says that some managers genuinely care about the company and its success, almost like they're taking care of it for the owners.

This theory flips the script a bit. It assumes that managers act more like stewards rather than agents. Stewards are seen as trustworthy and act in the best interests of the shareholders without needing heavy monitoring. This theory focuses on selecting managers with good character and values.

Stakeholder Theory:

Explanation: This theory says that companies should consider the interests of everyone involved, not just the owners. That includes employees, customers, and even the community.

Instead of just focusing on shareholders, stakeholder theory suggests that companies should consider the interests of all stakeholders—employees, customers, suppliers, communities, etc. The idea is that by balancing the needs of all stakeholders, the company can create long-term value.

Resource Dependence Theory:

Explanation: This theory looks at how companies rely on things from outside, like money or materials, to run their business. It's about managing these dependencies well.

This theory looks at how companies rely on external resources like capital, labor, and technology. It suggests that companies need to manage these dependencies effectively to survive and thrive. For example, they might form alliances or diversify their supplier base.

Transaction Cost Economics (TCE):

Explanation: TCE is about the costs involved in making deals or transactions between different parties. It looks at ways to make these deals cheaper and more efficient.

TCE looks at the costs involved in transactions between different parties, like buying and selling goods or services. It suggests that companies should organize themselves in a way that minimizes these transaction costs. This could mean vertically integrating (handling more parts of the production process internally) or using contracts and incentives effectively.

By- Commerce ka ladaka