What is Corporate Governance?

Corporate governance is the set of processes, customs, policies, laws, and institutions affecting the way a corporation (or company) is directed, administered or controlled. Corporate governance also includes the relationships among the many stakeholders involved and the goals for which the corporation is governed. The principal stakeholders are the shareholders, the board of directors, employees, customers, creditors, suppliers, and the community at large.

Corporate governance is a multi-faceted subject. An important theme of corporate governance is to ensure the accountability of certain individuals in an organization through mechanisms that try to reduce or eliminate the principal-agent problem. A related but separate thread of discussions focuses on the impact of a corporate governance system in economic efficiency, with a strong emphasis on shareholders' welfare. There are yet other aspects to the corporate governance subject, such as the stakeholder view and the corporate governance models around the world.

There has been renewed interest in the corporate governance practices of modern corporations since 2001, particularly due to the high-profile collapses of a number of large U.S. firms such as Enron Corporation and MCI Inc. (formerly WorldCom). In 2002, the U.S. federal government passed the Sarbanes-Oxley Act, intending to restore public confidence in corporate governance.

Key elements of good corporate governance principles include honesty, trust and integrity, openness, performance orientation, responsibility and accountability, mutual respect, and commitment to the organization.

Commonly accepted principles of corporate governance include:

·        Rights and equitable treatment of shareholders

·        Interests of other stakeholders

·        Role and responsibilities of the board

·        Integrity and ethical behavior

·        Disclosure and transparency

Corporate governance principles and codes have been developed in different countries and issued from stock exchanges, corporations, institutional investors, or associations (institutes) of directors and managers with the support of governments and international organization. Although the US model of corporate governance is the most notorious, there is a considerable variation in corporate governance models around the world. The intricated shareholding structures of keiretsus  in Japan, the heavy presence of banks in the equity of German firms, the chaebols  in South Korea and many others are examples of arrangements which try to respond to the same corporate governance challenges as in the US.

The positive effect of corporate governance on different stakeholders ultimately is a strengthened economy, and hence good corporate governance is a tool for socio-economic development. (source wikipedia)

==============================================================================

This site is mainly dedicated for Students of Law Schools, Law Universities, Students of Higher Education in Law, Admission in Law Schools, Scholars in Law, Students of Bar-at-Law, Law admission information, College of Law, Law Notes, Law Training, Law Tuition,  Law Study Guidelines, Business Law