July 12, 2008






1.0  Background of the Study

The set of processes, customs, policies and institutions that virtually affects the way a particular corporation is being directed, administered or controlled is known as corporate governance. Corporate governance, in addition, is consists of the relationships among the many stakeholders involve and the goals by which the corporation is governed. Apart from the stakeholders, there are many parties that include the regulatory body, suppliers, employees, investors, customers and the community in general.

There are principles that are deemed to be important for corporate governance. These are rights and equitable treatment of shareholders; interests of other stakeholders; roles and responsibilities of the board; integrity and ethical behaviour; and disclosure and transparency. To lessen adversities in governance itself, mechanisms and controls are implemented. Internal governance controls in the form of monitoring by the board of director and remuneration and external controls are applied.

This multifaceted concept varies in application in terms of corporate culture, governance models, principles and implementation of codes, guidelines and regulations. The variation of corporate governance centers the underlying principles, beliefs, norms and culture to which it is being applied. For instance, Japan integrates the 'kairetsus' in their shareholder structures, the German firms incorporate their financial industry, South Korea as well integrates a concept unique to their culture known as the 'chaebols'.

This research purports on investigating corporate governance on island nations. Island nation or country – either populous nations or small island countries – refers to a country that is wholly confined to an island or group of several islands and has no territory on the mainland of a continent. These countries have various ways in approaching their corporate governance; thus, different practices, systems, institutions and processes. How the corporate governance of island nations differ with that of the other nations methods, approach and belief regarding corporate governance will be explored.   


2.0  Theoretical Framework

The theory that supports the aims of the study is Hofstede's cultural dimensions that explain the differences among work-related value patterns that affect the functioning and structuring of organizations.

Ø      Large versus small power distance. Large power distance is the extent to which the members of a society accept that power in institutions and organizations is distributed unequally; while small power distance is the extent to which members of a society or organization accept that power is distributed fairly as employees are free to participate.

Ø      Strong versus weak uncertainty avoidance. Strong uncertainty avoidance means the degree to which the members of a society feel uncomfortable with uncertainty and ambiguity, which leads them to support beliefs promising certainty and to maintain institutions protecting conformity; while weak uncertainty avoidance is the degree to which members tend to be relatively tolerant of uncertainty and ambiguity and require considerable autonomy and lower structure.

Ø      Individualism versus collectivism. Individualism is the preference for a loosely knit social framework in society; collectivism stands for a preference for a tightly knit social framework.

Ø      Masculinity versus femininity. Masculinity is the preference for achievement, heroism, assertiveness and material success; while femininity refers to a preference for relationships, modesty, caring for the weak and the quality of life.

3.0  Research Objectives

The main aim of the study is to determine the corporate governance practices, systems and structures in island nations. The elements of the corporate governance that firms operating in island nation are utilizing will be explored as well. The general objective of the study is to able to contribute in the field of international management research, especially in the issue of culture. This objective can be achieved by completing the study consistently and carefully. The specific objectives of the study are to accomplish the following:

  • To determine the prevailing practices, systems and processes in corporate governance on island nations
  • To distinguish how the culture of the place influence corporate governance


4.0  Research Method

The research design for the study is descriptive as it intends to present facts concerning the nature and status of a situation, as it exists at the time of the study and to describe present conditions, events or systems based on the impressions or reactions of the respondents of the research. The descriptive research also concerns the relationships and practices that exist, beliefs and processes that are ongoing, effects that are being felt, or trends that are developing.

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