Submitted by: Submitted by Crowe
Views: 220
Words: 253
Pages: 2
Category: Business and Industry
Date Submitted: 10/17/2011 04:00 AM
CORPORATE GOVERNANCE
Traditionally defined as the ways in which a firm safeguards the interests of its financiers (investors, lenders, and creditors). The modern definition calls it the framework of rules and practices by which a board of directors ensures accountability, fairness, and transparency in the firm's relationship with its all stakeholders (financiers, customers, management, employees, government, and the community). This framework consists of (1) explicit and implicit contracts between the firm and the stakeholders for distribution of responsibilities, rights, and rewards, (2) procedures for reconciling the sometimes conflicting interests of stakeholders in accordance with their duties, privileges, and roles, and (3) procedures for proper supervision, control, and information-flows to serve as a system of checks-and-balances. Also called corporation governance.
INFORMATION ASYMMETRY
Condition in which at least some relevant information is known to some but not all parties involved. Information asymmetry causes markets to become inefficient, since all the market participants do not have access to the information they need for their decision making processes. opposite of information symmetry
Situation that favors the more knowledgeable party in a transaction. In most markets (especially where the goods being traded are of uncertain quality, such as used equipment), a seller's is usually in a more advantageous position because his or her store of information is based on numerous sales conducted over the years. A buyer's information, however, is based usually on an experience of only a few purchases. A similar situation exists between a commercial lender and a borrower.