Question

Explain how poor corporate governance can be avoided by following corporate governance principles by the Organization for Economic Cooperation and Development and other examples.

need detailed answer.

Answer 1

Corporate governance is basically a set of processes or mechanisn which helps a corporation to function properly.

The Organization for Economic Cooperation and Development has laid down certain principles, that would ensure corporations to have a good corporate governance. The principles are:

1. Rights and equal treatement to all its shareholders: It is important for organisation to understand that its shareholders has some rights and it must help its shareholders to exercise their rights. Organisations can do this by communicating with the shareholders effectively and by encouraging these shareholders to be more active in general meetings of the corporation.

2. Interests of other stakeholders: It is important for the organisation to understand that they have some obligations towards the non-shareholder stakeholders also and they much fulfil its obligations towards them. These stakeholders would include, the employees, the customers, etc.

3. Role and responsiblities of the board: It is the responsibility of the board to understand the performance of the management and review them accordingly. For this it is important of the board to have sufficient amount of skill sets. This also requires the management to have the adequate sixe so that they can practice independence in their decision making.

4. Disclosure and transparency: This is very important for an organisation to do. It must disclose all the relevant information to the public about the organisation or the boards so that the stakeholders feel some amount of accountability. This disclosure should be timely done and should ensure that all the investors of the company have clear access to the information about the company.