External Governance Control Mechanisms Include __________ And ________________.


Answer ( 1 )


    External Governance Control Mechanisms Include __________ And ________________.

    Are you curious about the different ways external governance control mechanisms can help your organization thrive? Look no further! In this blog post, we’ll dive into two key mechanisms and explore how they can be effectively implemented to ensure your business stays on track. From compliance regulations to third-party audits, these solutions are essential for promoting transparency and accountability within any organization. So sit back, relax, and get ready to learn more about external governance control mechanisms that every successful company should have in place!

    External Governance Control Mechanisms

    External governance control mechanisms are put in place by organizations to ensure adherence to external regulations. These mechanisms can include compliance officers, ethical codes of conduct, and financial audits. By having these controls in place, organizations can help to protect themselves from legal and reputational risks.

    What are the types of External Governance Control Mechanisms?

    External governance control mechanisms include both formal and informal mechanisms. Formal mechanisms are typically codified in law or regulation, while informal mechanisms may be embedded in social norms or industry practices.

    Some common formal external governance control mechanisms include licensing requirements, permits, and inspections. These controls are typically imposed by government agencies in order to protect public safety, health, and welfare. Other examples of formal external governance control mechanisms include financial disclosure requirements and anti-corruption laws.

    Informal external governance control mechanisms are often less well-defined and more difficult to enforce. They may include industry codes of conduct, social pressure from shareholders and consumers, and self-regulation by businesses. Whatever their form, these controls seek to shape corporate behavior in order to promote economic efficiency, protect the environment, or ensure social justice.

    Advantages and disadvantages of External Governance Control Mechanisms

    External governance control mechanisms are tools that organizations use to monitor and influence the behavior of their employees. These mechanisms can include things like financial incentives, employee training, and independent audits.

    There are both advantages and disadvantages to using external governance control mechanisms. On the plus side, these mechanisms can help to ensure that employees are following company policies and procedures. They can also motivate employees to improve their performance and prevent misconduct. However, there are also some downsides to using external governance control mechanisms. For instance, they can create an atmosphere of distrust and suspicion among employees. Additionally, they can be costly to implement and maintain.

    The most common External Governance Control Mechanisms

    There are a few different external governance control mechanisms that companies use in order to ensure that their board of directors is behaving ethically and responsibly. The most common ones include:

    1) Shareholder Proposals: Shareholders can submit proposals to the board of directors asking them to take specific actions (e.g. adopt a code of conduct, increase transparency around board deliberations, etc.). If a shareholder proposal gets enough votes from other shareholders, then the company is legally required to consider it.

    2) Investor Activism: Investors can put pressure on companies by publicly voicing their concerns about the company’s governance or by buying up shares in order to gain a seat on the board of directors.

    3) Media Scrutiny: The media can put pressure on companies by writing negative stories about them if they believe that the company is not being run in an ethical or responsible manner.

    4) Government Regulation: The government can pass laws or regulations that dictate how companies must behave in certain situations. For example, the Sarbanes-Oxley Act imposes stricter financial reporting requirements on public companies in order to prevent fraud.

    How to choose the right External Governance Control Mechanism for your company

    There are many different types of external governance control mechanisms available to companies, and choosing the right one can be a difficult task. Some common external governance control mechanisms include independent auditors, boards of directors, and shareholders. Each of these has its own advantages and disadvantages, so it is important to carefully consider each option before making a decision.

    Independent auditors provide an objective perspective on a company’s financial statements and can offer recommendations for improvements. However, they can be expensive, and their reports may not be made public.

    Boards of directors are responsible for overseeing a company’s management and making decisions about strategic direction. They are typically composed of individuals with experience in the industry and knowledge of the company. However, board members may have conflicts of interest, and they may not be impartial when it comes to making decisions about the company.

    Shareholders are the owners of a company and have a vested interest in its success or failure. They can elect board members and vote on corporate decisions. However, shareholders may not have the expertise or time to actively participate in governance.


    In conclusion, external governance control mechanisms are an important part of any business and can help to ensure that the company is running efficiently. These control mechanisms include things like internal controls, corporate compliance standards, external monitoring systems, risk management practices, and more. All of these measures need to be put in place and monitored regularly in order for a business to have the best chance at success.

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