Corporate governance is nothing more than how a corporation is administered or controlled. Corporate governance takes into consideration company stakeholders as governmental participants,the principle participants being shareholders, company management,and the board of directors.
Corporate governance may include:
- Control and direction processes
- Regulatory compliance
- Active ownership and investment in a company
Meaning of Corporate Governance
It provides a roadmap for a corporation,helping the leaders of a company make decision based on the rule of law,benefits to stakeholders,and practical processes. It allows a company to set realistic goals,and methodologies for attaining those goals.
Definitions of Corporate Governance
According to Financial Times,1997__”Corporation governance is the relationship of a company with its stakeholders;more broadly its relationship to society”.
According Financial Times 1999__” Corporate governance is about promoting corporate fairness, transparency and accountability”.
Principles of Corporate Governance
The principles of corporate governance can be used by an organization to assist them in designing and implementing their own corporate governance guidelines.
1. Interests of stakeholders: An principles objective of an organization is to keep shareholders happy by making optimum use of company resources. They must realise that they have obligations toward all shareholders. It is important to set long-term goals for the benefit of the shareholders to increase their ROI (return on investment).
2. Broad Structure: The structure of the board and committees musts be made in such a way keeping their strengths and weaknesses in mind. The management must be monitored to keep a track of their progress. They must be committed to their duties and responsibilities.
- Timely Disclosure: A company must disclose its annual reports transparently and on time. The organization must be honest and transparent with the roles and responsibilities of the board and management. Financial information must be maintained and balanced to prepare annual reports and to ensure that shareholders have access to reports anytime they want.
- Ethics and Code of Business Conduct: This is an important element of corporate governance is conducting a company ethically and by following laws and code of business conduct. A code of business conduct must be developed for the management and board of directors to facilitate ethical and responsible decision making.
- Rights of Shareholders: The organization musts respect the rights of the shareholders and allow effective exercise of those rights. Information must be easily available to shareholders are they must be encourage to take an interest in the organization and attend meetings to better understand the organization performance and financial condition.