Corporate governance refers to the system of rules, practices, and processes by which a company is directed and controlled. It involves balancing the interests of a company's many stakeholders, such as shareholders, management, customers, suppliers, financiers, government, and the community.
Corporate governance provides a framework for attaining a company's objectives, which include enhancing shareholder value, safeguarding the rights of shareholders and other stakeholders, managing risks effectively and fostering sustainability.
Here are the answers to some of the most popular questions about corporate governance:
The board of directors is responsible for overseeing a company's management and ensuring that it acts in the best interests of shareholders. The board sets strategic objectives for the company and monitors its progress toward achieving those objectives. It also makes decisions about executive compensation and succession planning.
Shareholder rights refer to the legal entitlements that shareholders possess with respect to their investments in a company. These rights can include voting on major decisions such as mergers or acquisitions, electing members of the board of directors, and receiving dividends.
Corporate responsibility refers to a company's obligations to its stakeholders beyond just maximizing profits. This can include social responsibility (such as reducing environmental impact), ethical behavior (such as avoiding bribery), and philanthropic activities (such as charitable giving).
Transparency refers to open communication about a company's operations and financial performance. Disclosure involves providing information to stakeholders about a company's financial condition, including its revenues and expenses.
Ethical decision-making involves making choices that align with a company's values while also taking into account potential impacts on stakeholders. Ethical decisions may involve trade-offs between short-term benefits and long-term sustainability.
Corporate governance is important because it helps ensure that a company operates in an ethical and responsible manner. This, in turn, can help build trust with stakeholders, reduce risk, and enhance long-term profitability.
Examples of good corporate governance practices can include having a diverse board of directors, aligning executive compensation with long-term performance, engaging with stakeholders regularly, and establishing clear codes of ethics and conduct.
References:
Tricker, R.I. (2015). Corporate governance: Principles, policies, and practices (3rd ed.). Oxford: Oxford University Press.
Monks, R.A.G., & Minow N. (2011). Corporate Governance (5th ed.). Hoboken, NJ: Wiley.
Mallin C.A.(2010). Handbook on International Corporate Governance: Country Analyses (2nd ed.). Cheltenham : Northampton
4.Bhattacharya,C.B., Sen,S.(2004). Doing Better at Doing Good: When Why and How Consumers Respond to Corporate Social Initiatives
