Difference Between Private Sector And Corporate Governance

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a) Compare and contrast the key differences between public and private sector organizations that may impact on the application of corporate governance principles.
Today the importance of corporate governance is widely accepted throughout the world. This may be due to excesses number of corporate scandals, high global competition, integrated financial markets, and importance stakeholders dialogue in running the organizations. Corporate governance means accepted business practices, laws, and regulations which together governs the relationship between corporate managers and entrepreneur, in a market economy for both private ownerships and public institutions. (Oman, 2001) However, there is no universal definition of term ‘corporate governance’.
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In the private sector, the most kind of enterprise is governed by the Corporation Act or Company’s Act. Other than this, non-profit organizations in private sector may incorporate under the Associations and Incorporations Act. These regulations presents an overview of the rules governing corporations and in particular the duties and responsibilities of directors and other officers, the protection of stakeholder interests, and disclosure requirements. However, many of the public organizations like, state owned enterprises and public private partnership is governed by State Owned Enterprises Act. The context is constrained by Ministerial directions, reporting requirements that may be to Ministers or Departments while breaking the principle of timely and accurate disclosure on all material matters regarding the corporation to the stakeholders.
Fourthly, complexity of a multi-layered structure of the public sector with specific characteristics and finalities can have difference. Spanhove and Verhoest describes that public sector at a specific governmental level is a house with several floors, where one can distinguish the following levels
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David and Georges describes that cost effective, transparent, and accountable public sector can be built by using an effective corporate governance framework which incorporates sound values, cost structures, and risk management processes. (David and Georges, 1998) In the public sector, risk management involves making decisions accordingly with public service values and ethics and statutory requirements. This means that more attention should be devoted to ensuring that the best decision is made rather than quick decisions. However, the effective implementation of risk management practices is a major challenge for public sector managers, particularly as the culture under which they have operated has traditionally been risk averse. Also, lack of expertise in risk management continues to be a constraint on the performance of the public