Corporate Governance - Mechanisms and Controls

Mechanisms and Controls

Corporate governance mechanisms and controls are designed to reduce the inefficiencies that arise from moral hazard and adverse selection. For example, to monitor managers' behavior, an independent third party (the external auditor) attests the accuracy of information provided by management to investors. An ideal control system should regulate both motivation and ability.

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Famous quotes containing the word controls:

    “Ask anyone committed to Marxist analysis how many angels on the head of a pin, and you will be asked in return to never mind the angels, tell me who controls the production of pins.”
    —Joan Didion (b. 1934)