What are the two main theories of corporate governance?

Question

Quizplus · Accepted Answer

The two main theories of corporate governance are agency theory and stakeholder theory. Agency theory focuses on the relationship between the principal (shareholders) and agent (management) and how to align their interests. Stakeholder theory argues that a company should consider the interests of not only shareholders but also other stakeholders such as employees, customers, suppliers, and the community. Option A is incorrect as audit reliance and board of directors' responsibility are not theories of corporate governance but responsibilities of the audit committee and the board of directors. Option C is incorrect as common law and code law refer to legal systems, not theories of corporate governance. Option D is incorrect as internal and external auditing are methods of monitoring and evaluating corporate governance, not theories.

What Are the Two Main Theories of Corporate Governance