In publicly held companies which are formed by contribution of capital from thousands ofrnsharehold ers, ownership usually separates from the control of disperse d shareholders and goesrninto the hands of few managers or few controlling shareholders. Total separation betweenrnownership and control in turn creates a ri sk of the managers (agent) working for their ownrninterest at the expense of the shareholders' (principal 's), what is known as agency cost. Thisrnpaper posits that the separation between ownership and control is growing in Ethiopia andrnacco rdingl y submits some empirical evidence in support of adopting good corporate governancernprinciples and laws in this regard. Based on the available data and literature on corporaterngovernance, the paper attempts to show the deficiency in the Commercial Code and otherrnC' pertinent Proclamations and Directives in addressing current issues in corporate governancern(.rnornornornrelated to board of directors, protection of rights of minority shareholders and issues regardingrnfinancial reporting, transparency and audit. The analysis of the relevant laws shows that thernoverall standard of corporate governance in Ethiopia is disappointing. Accordingly, the paperrnprovides detailed recommendations based on internationally recognized best principles andrnpractice s of corporate governance as tht:y are expected to address the specific needs of Ethiopianrnshare companies .rnMoreover, the paper argues that good economic and corporate governance are essential prerequisitesrnfor promoting economic growth and reducing poverty and thus urges policy makers inrnEthiopia to give heightened attention to reform of corporate governance so as to achieve thernsame. It also contends that Ethiopia should adopt a mandatory law of corporate governancerninstead of a market-oriented corporate governance system to protect shareholder interests fromrnthe abuses and mismanagement of directors and officers and to protect minority shareholdersrnfrom the opportunism of controlling shareholders as well as to promote accelerated economicrndevelopment in the country. The study employs both primary and secondary data.