Question

Describe the concept of ‘corporate governance’ and provide at least TWO (2) examples of corporate governance issues

Answer 1

Corporate Governance

Corporate Governance is the system by which companies are directed and controlled. Good corporate governance involves harmony relationship between corporate management, shareholders and stakeholders. Corporate Governance maintain the structure of the company and it involves setting of objective of the company, measuring and evaluating the performance of the company.

Reason of poor corporate governance

1. Short term profitability

2. Poor relationship between management.

3. Misleading of information and accounts.

4. Lack of supervision etc.

Major issues in corporate governance

1. Lack of accountability: Proper accountability is required in each level to maintain the effective corporate governance. From top level to lower level, each level and division accountability is necessary because the obligation of every individual to accounts its activities and accept responsibility. So, accountability is one of the major issues that arises in each level of management and direct effect the goal of the company.

2. Lack of Transparency: Another major issues that arises in the company that effects the goal of the company. For proper corporate management, companies are required to maintain transparency. Disclosure of true information in the front of the investor, maintain the goodwill of the company. Fraudulent practices destroy the ethical relationship between management and stakeholders. So, corporate governance required transparency in the books of accounts that shows the proper working in the front of the stakeholders.