Question

As a student of corporate governance what does it mean when we say that corporate governance is about ‘Individuals, companies, society, governments, controls, investments, efficiency and transparency?

Answer 1

Corporate Governance is an increasingly significant aspect of business and organizational management, extending to international politics and trade laws; and to globalized economics, corporations and organizations, and markets.

Theories, standards and regulations relating to Corporate Governance began to develop properly in the 1990s, so it is a relatively recent field of economic and management practice.

From a simple and minimal point of view:

• Corporate Governance is a specialized mechanism for regulating risk in corporate activities, thereby (hopefully) averting corporate disasters, scandals, and consequential damage or losses to investors, staff, society and the wider world.

More broadly:

• Corporate Governance is a very sophisticated and flexible concept which addresses fundamental organizational purposes (for every type of organization - from a tiny corner-shop, to the largest multinational conglomerate) together with the most serious challenges arising from the globalization of corporate and organizational structures and the markets they serve.

Good corporate governance (CG) is primarily the responsibility of every company, and both hard law and soft law should provide comprehensive corporate governance framework, thereby encouraging the introduction of high governance standards and best practices in the companies’ corporate governance system.

Governments and parties to corporate governance:

The most influential parties involved in corporate governance include government agencies and authorities, stock exchanges, management (including the board of directors and its chair, the Chief Executive Officer or the equivalent other executives and line management shareholders and auditors).Other influential stakeholders may include lenders, suppliers, employees, creditors, customers and the community at large.
A board of directors is expected to play a key role in corporate governance. The board has the responsibility of endorsing the organization's strategy, developing directional policy, appointing, supervising and remunerating senior executives, and ensuring accountability of the organization to its investors and authorities. Internal corporate governance controls Internal corporate governance controls monitor activities and then take corrective action to accomplish organizational goals. Examples include: Monitoring by the board of directors:
The board of directors, with its legal authority to hire, fire and compensate top management safeguards invested capital. Regular board meetings allow potential problems to be identified, discussed and avoided. Whilst non-executive directors are thought to be more independent, they may not always result in more effective corporate governance and may not increase performance. Different board structures are optimal for different firms. Moreover, the ability of the board to monitor the firm's executives is a function of its access to information.

Thankyou.