Transactions Costs (Devolpments & Definitions) Opportunity Costs Essay

Transactions Costs (Devolpments & Definitions) Opportunity Costs (Devolpments & Definitions) finally link both ie Opportunity Costs should be considered as a T - Essay Example theoretical area there are plenty of models and empirical evidence that can help the management team to formulate a well grounded plan, in real terms the changes and the turbulences that tend to characterize the commercial markets create significant obstacles towards the establishment of an appropriate and effective business strategy. This paper examines particularly the influence of two economic variables, the transaction costs and the opportunity cost on the planning of the corporate strategy to the level that the above two elements can often interact and have therefore a more decisive role in the relevant process. The definitions and the particular characteristics of the above two criteria of ‘financial measurement’ are presented using a series of examples from their applications in practice. The findings of the literature are also been considered as crucial to the validity of the assumptions made. On the other hand, the reference to the work of Coese and Williamson h as been proved valuable to the explanation of these elements’ existence and role in the business environment. In economics and related disciplines, a transaction cost is ‘a cost incurred in making an economic exchange; a number of kinds of transaction cost have come to be known by particular names, like a) Search and information costs are costs such as those incurred in determining that the required good is available on the market, who has the lowest price, etc., b) Bargaining costs are the costs required to come to an acceptable agreement with the other party to the transaction, drawing up an appropriate contract and so on, and c) Policing and enforcement costs are the costs of making sure the other party sticks to the terms of the contract, and taking appropriate action (often through the legal system) if this turns out not to be the case’. Today, transaction cost economics is used ‘to explain a number of different behaviors. Often this involves considering as "transactions" not only

DEVELOPMENT OF THE UK CODE OF CORPORATE GOVERNANCE Essay

DEVELOPMENT OF THE UK CODE OF CORPORATE GOVERNANCE - Essay Example The paper reviews the development of corporate governance and the outcomes of the changes since 1990 to the culmination of a combined code in 2003, and the impact of the recent bank crisis on corporate governance structures (Lee 2006, p.36). The rise of Corporate Governance Since the 1980s, corporate governance issues have continued to attract immense interests. Issues such as corporate fraud, corporate failure, and corporate collapse, excess of executive remuneration, abuse of management power, and corporate social and environmental responsibility gained prominence, and have continued to attract attention in media reports, academic debates, public forums, regulatory agendas, and governmental policy. However, despite the earlier concerns and subsequent regulatory endeavors, corporate governance issues became even more prominent and exposed with the onset of the global financial crisis 2007-10. Subsequently, some academics, policy analysts, and corporate practitioners have associated the severity and increasingly circular nature of the financial and economic crisis to corporate governance failures, whether functional or technical (Sun, Stewart and Pollard 2011, p.16). In the 1980s, broader stakeholder concerns remained eclipsed by the market-driven, growth- oriented outlooks of Reaganite and Thatcher economics. The Director’s responsibility to enhance stakeholder value was reinforced with profit performance models gaining prominence and shaping the foundation for the privatization of state-run entities. The threat of predator takeover bids (for the market control) was touted as a critical incentive for strong board-level performance. In the UK, the Guinness case and consequently, the collapse of Robert Maxwell’s companies brought to the fore the need for checks and balances (especially for boards dominated by powerful executive directors), as well as in cases where the posts of chief executive and chairman of the board were merged, and the outside directors were weak (Boyd 1994, p.335). It was at this time that the concepts of corporate governance became the focus of attention; in fact, the phrase itself was son to emerge. How Corporate Failure Led to Growth of Corporate Governance The UK economy experienced a prolonged period of economic growth from 1981 to 1989; however, in the same period, there were a number of company failures arose with some manifesting spectacular collapses including Asil Nadir’s Polly Peck, Robert Maxwell’s MCC, plus the $8bn failure of the Bank of Credit and Commerce International (BCCI). These collapses shared a number of similarities: a recent clean bill of health from auditors, an ostentatious and powerful leader, an absence of action from non-executive directors and minimal participation with institutional investors (Smerdon 2010, p.5). These collapses stirred public concern, partly because of the massive involvement of numerous of deposit holders in the collapse of BCCI and thousan d of pensioners in the collapse of the Maxwell Empire, and also because of the overriding perception that the UK industry was lagging behind economically compared to other countries with Europe. Hence, it can be argued that the evident failure or lack of accurate reporting in the majority of cases that would have otherwise allowed investors to spotlight the warning signs was the biggest motivation for the drive for corporate governa