Question

Q Name three mechanisms that ensure firms are run in the interests of shareholders

Q How do we know that corporate governance matters? Name one example

Answer 1

Q.1 Three mechanisms that ensure firms are run in the interests of shareholders are :

1. Managerial compensation
2. Direct intervention by stockholders
3. Threat of takeovers

Q.2 Corporations need comprehensive governance frameworks that give themselves the tools to prevent risk and make effective decisions. Once a company establishes its rules of governance; board members, steering executives, as well as managers should know exactly what their roles are and how they play into the overall organizational structure. Governance solidifies each person's position so that they don't stray from the mission. Proper governance structures identify the distribution of rights and responsibilities among different participants in the corporation and outline the rules and procedures for making decisions in corporate affairs.

Good governance can offer a number of important benefits to organizations, including:

• Better organizational strategies and plans
• Improved operational and process effectiveness/efficiency
• Improved project management and delivery
• More prudent regulatory compliance, financial and risk management
• Improved member and stakeholder/employee engagement and communication flow
• Increased agility to which an organization can deliver on its purpose and goals

A good example of Corporate Governance is ITE Group, which is listed on the London Stock Exchange (LSE).