Industrial Relations and Human Resource Management Finance Essay

Abstract

The aim of this paper is to explore and review some of the scholars research work on corporate governance and how it impacted the labour management. The paper examined various literature reviews on shareholders model of corporate governance and further explained different types of governance practices in the world in relation to employee management. The interest of investors is to maximize profit and minimize cost while that of employee is for consistent and increase in wages and salary. There are diverse views and opinions on the impact of corporate governance on labour management; some have adverse while some are favourable. We concluded that, the effect on labour management varies with the strength of labour.

Keywords: Corporate governance, shareholders and labour management

Introduction

Corporate governance has successfully attracted the interest of the public because of its obvious importance and relevance to the economy and society at large. Although, the concept of corporate governance is poorly defined because it covers a large number of different economic phenomenon. Corporate governance has long been a subject of considerable interest and controversy, but debates and theories on this topic have become much more prominent in advance economies over the years. As a result, different people have come up with different definitions that basically reflect their special interest in the field. Corporate governance is the relationship among stakeholders in the process of decision making and control over firm resources. The three critical stakeholders are capital, labour and management.

There are basically two different models of the corporate governance: the shareholder model and the stakeholder model. Shareholder model of corporate governance can be described as the formal system of accountability of senior management to shareholders while the Stakeholder model of corporate governance can be used to describe the network of formal and informal relations involving the corporation. The role of labour in corporate governance has been less of a focus but recently there is a growing need of bringing both corporate governance and labour

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relations systems together. This study focuses on labour management and how the shareholder model of corporate governance impacts labour management.

Literature review

Corporate governance has been argued to have started from the recognition of the centrality of corporate enterprises for allocating resources in the economy. Corporate governance play a vital role in shaping the outcome of the economy through decisions such as investment, employment and trade, the process through which corporate revenues/returns are allocated impacts the performance of the economy as a whole (O'Sullivan, 2003). Corporate governance boarders around institutions that influence business corporations distribute their revenues and returns (O'Sullivan, 2003). The positive effect of corporate governance on different stakeholders ultimately is a strengthened economy, and hence good corporate governance is a tool for socio-economic development. The parties involved in corporate governance include the regulatory body (e.g. the Chief Executive Officer, the board of directors, management, shareholders and Auditors). Other stakeholders who take part are suppliers, employees, creditors, customers and the community at large.

Corporate governance is the system by which business corporations are directed and controlled. The corporate governance structure specifies the distribution of rights and responsibilities among different participants in the corporation, such as, the board, managers, shareholders and other stakeholders, and spells out the rules and procedures for making decisions on corporate affairs. By doing this, it also provides the structure through which the company objectives are set, and the means of attaining those objectives and monitoring performance", OECD Principles of Corporate Governance (1999).

Goodijk (2007) highlighted several theories in his research on how corporate governance has been affected:

The agency theory is based on the separation of ownership and control and identifies the agency relationship where one party, the owner, delegates work to another party, the agent/management. The company's management is considered to operate on behalf of the principles but the agency may not always act in the best interests of the principal. The company is therefore seen as nexus of contracts.

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The theory of transaction cost economics is focused on the company as a governance structure and an undertaking transactions (cost reductions) internally.

The stakeholder theory takes account of a wider group of constituents instead of focusing on shareholders. The management is challenged to make 'the balancing act', to meet the pluralistic claims of all the different stakeholders.

Stewardship theory as explained by Rienk refers to directors who are regarded as stewards to the company's assets and act in the best interest of shareholders and taking into account the environmental dependencies and uncertainties.

Corporate governance is the set of processes, customs, policies, laws, and institutions affecting the way a corporation (or company) is directed, administered or controlled. Corporate governance also includes the relationships among the many stakeholders involved and the goals for which the corporation is governed (O'Sullivan, 2003). The principal stakeholders are the shareholders, the board of directors, executives, employees, customers, creditors, suppliers, and the community at large. The major importance of corporate governance is to ensure the accountability of certain individuals in an organisation through mechanisms that try to reduce or the principal agent problem.

Goodijk (2007) explained in his research that corporate governance focuses on three main areas:

The functioning and quality of the board

The functioning and quality of supervision

The accountability to shareholder and stakeholder

Corporate governance is a question of performance accountability (Demb and Neubauer, 1992). To improve the transparency, involvement and accountability of corporate governance, the Europeans emphasis on putting relationships and involving stakeholders while the Anglo - Saxon countries (USA and UK) focusing on the shareholder value maximization. Corporate governance is one key way of improving microeconomic efficiency and focuses on the relationships and interactions between capital, management and labour (Maher and Andersson, 1999; Aguilera and Jackson, 2003). Aguilera and Jackson found out that despite that corporate governance is

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concerned with the structure of rights and responsibilities among the parties with a stake in the firm yet there is still diversity of practices around the world nearly defies a common definition. In the UK and US, corporate governance is characterized by dispersed ownership where markets for corporate control, legal regulation and contractual incentives and key governance mechanisms. In continental Europe and Japan, blockholders like banks and families retain greater capacity to exercise direct control and, thus operate in a context with fewer market-oriented rules for closure, weaker managerial incentives, and greater supply of debt.

Corporate Governance Model

There are many different models of corporate governance around the world. These differ according to the variety of capitalism in which they are embedded. O'Sullivan (2003) explained the liberal model that is common in Anglo-American countries tends to give priority to the interests of shareholders. The coordinated model that one finds in Continental Europe and Japan also recognizes the interests of workers, managers, suppliers, customers, and the community. Each model has its own distinct competitive advantage. The liberal model of corporate governance encourages radical innovation and cost competition, whereas the coordinated model of corporate governance facilitates incremental innovation and quality competition (O'Sullivan, 2003). However, there are important differences between the U.S. recent approach to governance issues and what has happened in the UK. Maher and Andersson (1999) found out that in the United States, a corporation is governed by a board of directors, which has the power to choose an executive officer, usually known as the chief executive officer. The CEO has broad power to manage the corporation on a daily basis, but needs to get board approval for certain major actions, such as hiring his/her immediate subordinates, raising money, acquiring another company, major capital expansions, or other expensive projects. Some of the other duties of the board may include policy setting, decision making, monitoring management's performance, or corporate control. The board of directors is nominally selected by and responsible to the shareholders, but the bylaws of many companies make it difficult for all but the largest shareholders to have any influence over the makeup of the board Maher and Andersson (1999).

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Codes of Good Governance

Since the establishment of UK Cadbury Code in 1992, each country worldwide has introduced and revised corporate governance codes. The European countries use the principle based codes and the US Sarbanes Oxley Act uses the rules-based legislation (Goodijk, 2007). Generally there are sets of best practice recommendations regarding the behaviour within and the structure of the board, the information disclosure, transparency and accountability, the selection and remuneration of directors and the relationship with shareholders and the stakeholders.

There are diversities in the European codes, nevertheless, Europeans codes represent certain characteristics that are fundamental to good corporate governance such as: how to increase shareholders' influence, how to improve the board performance, how to take into account the other stakeholder interest. One of the European corporate governance codes is the OECD principles (OECD Principles of Corporate Governance, 1999). The OECD recognizes that one size does not fit all: there is no single model of corporate governance that is applicable to all countries. The OECD principles pay special attention to the minority shareholders' rights. The OECD principles include on the principle the stakeholders in corporate governance. The principles state that the corporate governance framework should recognize the rights of stakeholders established by law or through mutual agreements and encourage active co-operation between corporations and stakeholders in creating wealth, jobs and sustainability of financial sound enterprises.

Goodijk (2007) explained the difference between the Anglo-Saxon and European approach to corporate governance.

In the Anglo-Saxon approach, the view of the company is instrumental while European approach view is institutional.

Market-oriented with independent shareholders versus network-orientation

Dispersed share-ownership versus high ownership concentration

The outsider or the insider system

The leadership culture versus 'countervailing powers'

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The conflict versus consensus orientation

Short-term versus long-term results/relationships

Principle-based versus rules-based solutions

Focus on direct employee participation or representative involvement

Corporate governance in Continental Europe can be characterized by the following issues; principle-based codes, diversity and tailor made solutions, a broad stakeholder approach, a strong network orientation and an inside system model, with more focus on the balancing act, the labour relations and the employees' participation and getting consensus (Goodijk, 2007). Recent literatures show that there is an increasing trend towards more convergence on corporate governance issues:

Increased basic shareholder rights

Shareholders making more use of their right to vote

More independence of outside directors within the board

Having key board committees

Paying attention to both share and stakeholders.

Shareholders model:

There is no single model of corporate governance. Governance practices vary not only across countries but also across firms and industry sectors. However, one of the most striking differences between countries' corporate governance systems is in the ownership and control of firms that exist across countries. Systems of corporate governance can be distinguished according to the degree of ownership and control and the identity of controlling shareholders. Olivier (2000) explained that shareholders are the first stakeholder and they are individuals who own stock / shares in a company with the aim of making profit. If the company does well, they stand to make money based on how many shares they invested. However, if the company does badly, then the shareholder stands to lose his/her investment. The shareholder model explains the purpose of the corporation is to promote shareholder

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value and to serve a wider range of interests. Shareholder model of corporate governance is known as the formal system of accountability of senior management to other shareholders.

Shareholders model has a narrow view of relating investor with business manager on like the stakeholder model that takes a broader view of the firm. Olivier (2000) explained that shareholders are the first stakeholder and they are individuals who own stock / shares in a company with the aim of making profit. If the company does well, they stand to make money based on how many shares they invested. However, if the company does badly, then the shareholder stands to lose his/her investment. The shareholder model explains the purpose of the corporation is to promote shareholder value and to serve a wider range of interests

According to the shareholder model, the main objectives of any firm is to maximize shareholder wealth through effective and efficient allocation of resources in a productive and dynamic ways, this is to say, that the objective of the firm is to maximize profits (Maher and Anderson, 1999). Shareholders cannot achieve these objectives in isolation without the full involvement of business manager. Therefore, managers and directors have an implicit obligation to ensure that firms are run in the interests of shareholders. This is an underline problem of corporate governance which the principal-agent relationship arise from the separation of beneficial ownership and executive decision-making. The bane of this problem is the conflict of interest between the shareholders and managers. Investors are interested in maximizing shareholder value; managers may have other objectives such as maximizing their salaries. According to Maher and Anderson (1999), the interests and objectives of the principal (the investors) and the agent (the managers) differ when there is a separation of ownership and control. Since the managers are not the owners of the firm they do not bear the full costs, or reap the full benefits, of their actions.

Corporate Governance and Labour Management

It should be recalled that there is an interaction between capital, management and labour (Aguilera and Jackson, 2003). The omission of labour in most literatures of corporate governance mirrors weak employee involvement in the United States relative to that in economies such as Germany or Japan where the participation of labour is politically important and most times a basis of competitive advantage (Blair & Roe, 1999; Parkinson & Kelly 2001; Aguilera & Jackson, 2003). The role of employees in corporate governance is assumed to relate to their ability to

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influence corporate decision making and control firms' resources. There are some rules which limit managerial authority: shop floor-level job control, collective bargaining, and labour law (Marsden, 1999; Tilly & Tilly, 1998; Aguilera & Jackson, 2003). Aguilera and Jackson (2003) came up with a model that focuses on two vital dimensions that defines the relationship of an employee to making corporate decisions, these dimensions are:

• Employee's strategies of internal participation versus external control - this dimension explain how employees describe their interests in relation to corporate decision making. The external control refers to situations where management has the right to decision making. This is where the employees seek to control the firms' decision externally by assuming threats such as strikes. The representation of an employee is independent of management and preserved in strict separation from cooperative institutions that engage labour in the decision making of the firm.

Employees also can participate in the firms' decision making internally through internal channels of decision making to co-determine management actions (Streeck, 2001). This participation of employees does not stop the authority of managers but aims at democratizing decisions. Internal participation tends to have strong integrative functions, encouraging consensus and cooperation in the implementation of decisions.

Portable versus firm-specific skills - when the employee skills are "portable" across the firms or when investments are low, employees may favour exit over voice in response to grievances. On the contrary, when employee skills are firm-specific, their greater dependence on the firm makes the option to exit more difficult (Williamson, Watcher, & Harris, 1975). When employees invest in firm-specific skills thus create incentives to exercise voice in how those skills are formed and deployed. Employees may have interest in the safeguarding the organization and their job security. Therefore, similar to the liquidity or commitment of capital, skills influence the degree to which employees have a "stake" in the firm (Aguilera

& Jackson, 2003).

Aguilera and Jackson (2003) explained that the extent of which the internal participation/external control and portable/firm-specific skills within the firm is shaped by three sets of institutions. These are: the firm-level representation rights given to workers, the organisation of unions and the institutions of skills formation.

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1. Firm-level representation rights - it is said that labour struggled to gain collective rights to representation of firm decisions. The recognition of the right to organise is the most fundamental of these, giving employees individual rights to voluntarily elect their own representation and compelling management to bargain over a prescribed range of issues. Nevertheless, representation rights differ greatly in their strength and scope which ranges from rights to information, consultation and codetermination. Such rights also vary according to the type of decision at hand and the source enacting the rights.

The representation rights influence labour's relation to corporate governance. An institutional setting with weak representation rights does not provide channels to represent employees within firms' decision making. Institutional setting characterized by strong representation rights such as Germany, provide formal internal channels to give labour a voice in the firm's decision making by providing legal rights to information, consultation and codetermination in key decisions. Employee ownership is an additional means of establishing representation rights, but through the alternate channel of property rights (Aguilera and Jackson, 2003).

The organisation of unions - research explains that union organisation will shape the relation of labour to the firm. The interest of employees is defined in relation to their individual and collective identities, as well as according to how their interests are organised and institutionalized. Union organisation is seen is three models: class, occupation and enterprise (Dore, 1973;). Regarding the corporate governance, these models influence employee orientations toward internal participation in corporate decisions and external control.

The class based unions such as political and industrial unions tend to favour strategies of external control. The industrial unions are skeptical in participating in institutions that blur the boundaries of management and labour. They tend to favour centralized collective bargaining that restricts the discretion of individual firms through external control (Aguilera and Jackson, 2003). Unions that are

craft based with particular sets of qualifications tend to support external strategies of control because their interest in linked to uniform compensation of their particular skill/professional

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qualifications across enterprises. In an organisation, craft unions may break away from representation with the firm and follow their member's collective interest irrespective of the fate of the individual firm.

In contrast, enterprise-based unions recruit members among employees within a particular firm and support internal participation. Basically, it union is aimed at the preservation of long-term employment contracts and the regulation of internal promotion prospects. Countries with predominantly class-based and craft-based unionism, labour tends to pursue strategies of external control while countries with predominantly enterprise-based forms of unionism, labour tend to pursue strategies of internal participation (Aguilera and Jackson, 2003).

Skill formation - this affect corporate governance because of the portability or firm-specific nature of skill investments influences the relation of employees to the firm. In the United States, on-the-job training and markets is used to generate employee skills (Brown et al., 1997). Skill formation outside the firm makes the firm less dependent on employees and hence, employees will have less capacity to influence firm decisions through internal channels. In the high skilled segment of the U.S. economy, firms draw on the portable skills of professional employees whose skills were acquired outside the firm. In countries like Germany and Japan, high skilled production workers are greatly generated. In Japan, training is a part of a firm investment in firm-specific skills which reward employees with elaborate internal promotion systems (Culpepper & Finegold, 1999; Thelen & Kume, 2002). In Germany, training system is rooted in corporatists' arrangements among employer associations, industrial unions and the State.

Firm participates in occupational training in order to create widely certified skills that are portable across the firm. However, skill formation outside the firm will make the firm less dependent on employees and hence, employees will have less capacity to influence firm decision through internal participation (Aguilera and Jackson, 2003).

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Impact of shareholders model of Corporate Governance on labour management

Gospel and Pendleton (2003) discuss different sources of corporate governance influence on labour management. These sources are types of finance, objectives of finance providers and the intervention rights and practices associated with different forms of finance (Gospel and Pendleton, 2003: 558). Corporate governance is closely related to finance. It was further highlighted that there are different sources of finance: internal funds, debt and equity. Howard and Andrew (2005) stated that firms most times rely on internally generated funds; but from time to time firms have had to raise capital from external source. Debt is considered a constraint but were large and long-term, debt may draw lenders into a close relationship with the management (Stiglitz, 1985). Share equity can also be considered as a limitation-when the shareholders are many and small, investors may compensate for weakness in their relationship with mangers by exerting pressure through market trading (Howard and Andrew, 2005).

The shareholder model of corporate governance is said to have adverse effects on labour management In Anglo-American economies, labour is weak and labour suffers from moves to reduce workforces. The attempt of firm to enhance shareholder value has led to the damaging impacts on labour. This is because the capacity of firms to achieve real increases in return is highly limited (Gospel and Pendleton, 2003). Time-frame is another way in which labour management suffers pressure. The time frame of managerial decisions depends on the different types of shareholder model. The required payback period for employees investments is longer in internal systems than outside systems. The nature of business strategies, the importance ascribed to financial factors in decision making, the approach to securing managerial and employee commitment and the degree of co-operation with other firms - all these have a way of influencing the decisions of management positively or negatively (Gospel and Pendleton, 2003). They contribute to the variations in decision making of corporate governance.

According to Maher and Andersson (1999) the shareholder model corporate governance is primarily concerned with finding ways to align the interests of managers with those of investors, with ensuring the flow of external funds to firms and that financiers get a return on their investment. An effective corporate governance framework can minimise the agency costs and hold-up problems associated with the separation of ownership and control.

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Maher and Andersson (1999) highlighted three types of mechanisms that can be used to align the interests and

objectives of managers with those of shareholders:

Managers are to carry out efficient management by directly aligning manager's interests with those of shareholders e.g. Executive compensation plans, stock options, direct monitoring by boards, etc.

Another method involves the strengthening of shareholder's rights so shareholders have both a greater incentive and ability to monitor management. This approach enhances the rights of investors through legal protection from expropriation by managers e.g. Protection and enforcement of shareholder rights, prohibitions against insider-dealing, etc.

To use indirect means of corporate control such as that provided by capital markets, managerial labour markets, and markets for corporate control e.g. take-overs.

Maher and Andersson (1999) further explained that the ownership concentration is so prevalent as the dominant organisational firm, this is because it is one way of resolving the monitoring problem. According to the principle-agent model, due to the divergence of interests and objectives of managers and shareholders, one would expect the separation of ownership and control to have damaging effects on the performance of firms. Therefore, one way of overcoming this problem is through direct shareholder monitoring via concentrated ownership. The difficulty with dispersed ownership is that the incentives to monitor management are weak. Shareholders have an incentive to "free-ride" in the hope that other shareholders will do the monitoring. This is because the benefits from monitoring are shared with all shareholders, whereas, the full costs of monitoring are incurred by those who monitor (Maher and Andersson, 1999). These free-rider problems do not arise with concentrated ownership, since the majority shareholder captures most of the benefits associated with his monitoring efforts.

Therefore, for the closely held corporation the problem of corporate governance is not mainly about general shareholder protection or monitoring issues. The problem is said to be more one of cross shareholdings, holding companies and pyramids, or other mechanisms that dominant shareholders use to exercise control, often at the expense of minority investors (Maher and Andersson, 1999). The protection of minority shareholders becomes more critical in this case. Maher and Andersson (1999) claim that one of the issues that arise in this context is how do policy makers develop reforms that do not disenfranchise majority shareholders while at the same time protect the interests of minority shareholders.

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Another analysis of the shareholder approach by Maher and Andersson (1999) is that the analytical focus on how to solve the corporate governance problem is too narrow. The shareholder approach to corporate governance is primarily concerned with aligning the interests of managers and shareholders and with ensuring the flow of external capital firms. Nevertheless, shareholders are not the only ones who make investments in the corporation. The competitiveness and ultimate success of a corporation is the result of teamwork that embodies contributions from a range of different resource providers including investors, employees, creditors, suppliers, distributors, and customers. Corporate governance and economic performance will be affected by the relationships among these various stakeholders in the firm.

According to Howard and Andrew (2005), there have been debates about corporate governance whether or not the nature of corporate governance exists exclusively or even primarily to promote the interest of shareholders, whether the maximization of returns for shareholders leads to losses for other stakeholders, and whether recent trends have increasingly creates unfair remuneration for senior executives. As a result, debates of corporate governance have taken place in business and political circles in many countries including United States, United Kingdom, France, Germany, Italy, Netherlands and Japan over the past ten years, and most have embarked on programmes to reform aspects of corporate governance (Howard and Andrew, 2005). In time past, there have been various debates about changes in employment and industrial systems. In countries such as the United States and United Kingdom, there has been a clear increase in job insecurity, goring pay inequality, and erosion of benefits such as final salary pensions (Gospel and Pendleton, 2003). This has attributed to a decline in employee say at work and claim of managerial rights.

Howard and Andrew explained further that in Germany, there have been which debates centres around whether a system of employee voice through works councils at the workplace and collective bargaining at the industry level can continue to exist in a context where financial pressures on firms have intensified and where some argued a need for major changes in corporate governance. In Japan also, the system of lifetime employment is said to be under great risk, pay is being driven by market forces, and effective employee voice mechanisms are weakening (Howard and Andrew, 2005). In his framework, theories have concluded that the financing and governance of the firm and the management of labour interrelated (Gospel and Pendleton, 2003).

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Howard and Andrew (2005) states that the management of labour covers a set of major decisions and resulting outcomes. These decisions cover three main areas: work relations, employment relations and industrial relations. Employment relations deal with the arrangements governing such aspects of employment as recruitment, training, job tenure and reward systems. Work relations concern the way work is organized and the deployment of workers around technologies and production processes. Industrial relations is defined to cover the voice aspirations of employees and resulting institutional arrangements, such as joint consultation, work councils, and collective bargaining (Howard and Andrew, 2005).

The following further explains the implication of shareholder model on labour:

Labour interest: Labour will only protect their interest which is wages certainty and job security. Labour will support any investment decision that will sufficiently maintain current and future cash flow to prevent the wage cut and any staff redundancy. Howard and Andrew (2005) argue that Labour is primarily concerned with maintaining current and future cash flows sufficient to prevent wage or benefits cuts The new ideas and initiative might not be embraced, since every employee are risk averted and they might not have the spirit of entrepreneur like an investor . Any investment that looks uncertain or highly risky might be voted out by an employee. The possibility of embracing low risk investment that will translate into low growth and development so far is secured will be gladly supported by labour. In Germany, the representation of both financiers and labour management provides more balance between the two interests.

Long-term employment relationship: The shareholders model of corporate governance has an impact on labour relationship with the organisation, because of the sense of recognition and the perception of the corporation as social institute especially in US up until the 1970s.

In Olivier (2000) study, he argued that the participation of employees in corporate governance systems can be found in many countries and corporations throughout the world. Examples include:

Right to consultation. This is where employees must be consulted on certain management decisions. This right increases transparency of management decisions and allows employee opinion to improve the asymmetry of information between management and the market

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Duties of board members to consider stakeholder interests. This right reinforces accountability by

protecting stakeholders

Right to nominate / vote for supervisory board members. In many cases employee participation on the board is mandated. This right creates a check and balance system between management and the supervisory board, which in turn creates the perception of greater fairness

Compensation/privatization programs that make employees shareholders, thereby empowering employees to elect the supervisory board, which, in turn holds management responsible

There are some problems of corporate governance which some countries encounter; these include:

a dearth of relevant corporate information, including information on directors

supervisory boards of directors struggling to exercise proper oversight over management

a lack of independent auditing systems

management voting shares on behalf of shareholders

annual meetings held without sufficient notification time

In order to solve some of these problems of corporate governance Olivier Frémond (2000) came up with a reform process and emphasised on its importance. The reform process needs a champion that is, stakeholder group that is deeply interested in the long term health of the company and has the right to speak out to management on improving the corporation. The reform process also needs to provide incentives for change. Improvements in corporate governance standards could benefit employee shareholders in improving long term prospective health of company, safeguarding jobs and they stand to gain as shareholders if the corporation increases in value. The reform process must also be governed by clear rules, these rules must be enforced.

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Conclusion

Studies have shown the different theories of corporate governances in the Anglo - Saxon and European countries (USA and UK). Corporate governance is ensuring all stakeholders are represented and employee is a stakeholder so are suppliers, consumers, communities. All these entities don't have to be on the board but all decisions must favour all the stakeholders. The conflict of interest between the investor and employee is are inevitable point in our discussion. The shareholder model of corporate governance is said to have both favourable and adverse effect on labour management. The major importance of corporate

governance is to ensure the accountability of certain individuals in an organisation. The shareholders model

strikes the balance between the business owner, management and employee but give more protection

to labour.

The aim of this study has been to explain the importance of corporate governance and how he shareholder value impacts labour management. An aspect of this analysis explains on how the firm and its management emphasizes on management powers and decision-making and its impact on labour. It has also been noted that employee shareholders could seek representation on the supervisory board and can play an active role in strengthening corporate governance systems. Empowering employees as shareholders will also help to ensure that the basic principles of corporate governance are promoted. The effect of corporate governance varies with the strength of labour. Labors' real power and resources is determined by how much influence he has or corporate governance has over him.

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