Corporate Governance

Interests in corporate governance, specifically in business accountability, emerged in 2001-2002 in response to the financial collapses that large companies faced such as Enron in the United States, Parmalat in Italy, Ahold in Netherlands etc... . Governments and agencies, tried to prevent these scandals by issuing laws and regulations such as the Sarbanes–Oxley Act of 2002, United States federal law, however, shortly the interests in good corporate governance was renewed and emphasized after the recent financial crisis in 2008 which affected the global economy as a whole. The shareholders and stakeholders in the market lost trust in management’s loyalty to maximize their wealth and started seeking greater disclosure and more transparent explanations for major decisions (Luo 2005). Throughout those scandals and recessions that the business market has experienced, the corporate world reflected the absence of a well defined system of rules and the significant need for practices and processes by which companies can abide with in order to direct and control their daily operations and achieve growth in profits and market share while meeting stakeholders’ needs at the same time. In order to restore stakeholders’ confidence in corporate business and financial markets, politicians, national stock exchanges, authorities, and supranational organizations (such as European Union [EU], Organization for Economic Co-operation and Development [OECD] were forced to search for more effective governance practices (Coffee 2005, cited by Zattoni and Cuomo 2008). The voluntary Corporate Governance Code was introduced, as a mean to monitor, manage, and control companies and avoid future financial scandals. This code clearly defined the role of shareholders, board of directors and executive managers and encouraged ‘symbiotic relationships’ between them so that the ‘company is managed efficiently and the rewards are equitably shared among shareholders and stakeholders’. (Nisa and

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