Group 1
Corporate Governance
Theories of corporate management and Process

Definition:-

According to the business directory, management theory is a collection of ideas which set forth general rules on how to manage a business or organization. Management theory addresses how managers and supervisors relate to their organizations in the knowledge of its goals, the implementation of effective means to get the goals accomplished and how to motivate employees to perform to the highest standard.

Nexus-of-Contracts Theory

Nexus-of-Contracts Theory argues that the firm, or the modern corporation, is a complex adaptive system comprised of definable subsystems, called stakeholders. A stakeholder is any individual or group of individuals that either benefits or suffers as a result of the actions of that corporation. Therefore, the modern corporation is essentially a set of contracts or agreements between various stakeholder groups. The corporate stakeholder groups, engaged in this bargaining process typically include: stockholders, employees, consumers, suppliers, financiers, and local communities. The interests of these various groups are often represented by “agents.”

An agent is a person possessing technical knowledge that is paid by someone else to serve their interests

In order for the Nexus-of Contracts Theory to be useful it must be both descriptive and prescriptive; that is, it must describe how the classes of stakeholders (stockholders, consumers, managers, employees, consumers etc.) bargain in the real world, AND prescribe how those stakeholders ought to bargain. It must also describe and prescribe the role that leaders ought to play in this process. Hence, any theory of the modern corporation must answer three questions:

1. Whose ends (rights or interests) are in fact served by corporate leaders? (E.g.: stockholders, consumers, employees,