Corporate Governance

Corporate Governance
Governance is a mechanism for monitoring the actions, policies and decisions of corporations. Governance involves the alignment of interests among the stakeholders Corporate governance refers to the system by which corporations are directed and controlled.

Corporate governance is concerned with the ownership, control and accountability of companies. Good Corporate governance is key to Growing Profits and Reputation.
It represents the relationship among stakeholders that is used to determine and control the strategic direction and performance of organizations. Accountability is a key element as well as requirement for Corporate governance.

The governance structure specifies the distribution of rights and responsibilities among different participants in the corporation (such as the board of directors, managers, shareholders, creditors, auditors, regulators, and other stakeholders) and specifies the rules and procedures for making decisions in corporate affairs. There has been renewed interest in the Corporate governance practices of modern corporations, particularly in relation to accountability, since the high-profile collapses of a number of large corporations during 20012002, most of which involved accounting fraud.

Corporate governance goes beyond simply establishing a transparent and responsible relationship between managers and owners.

The presence of strong Corporate governance standards provides increased access to capital and thereby aids economic development.
Good Corporate governance attracts investors by assuring them that the business environment is fair and transparent; that companies can be held accountable for their actions or lack thereof; and those investments can be protected and contracts enforced.

Corporate Governance represents the moral framework, the ethical framework and the value framework under which an enterprise takes decisions. In the long run ethical behavior has a positive impact on the company's performance. Corporate Governance is the application of Best management practices, Compliance of law in true letter and spirit and Adherence to ethical standards for effective management and distribution of wealth Discharge of social responsibility for sustainable development of all stakeholders

Why is Corporate Governance Important?

Corporate governance is the way a corporation polices

itself. In short, it is a method of governing the company like a sovereign state, instating its own customs, policies and laws to its employees from the highest to the lowest levels. Corporate governance is intended to increase the accountability of your company and to avoid massive disasters before they occur. A company can also hold meetings with internal members, such as shareholders and debt holders as well as suppliers, customers and community leaders, to address the request and needs of the affected parties.

Corporate Governance as Risk Mitigation

Corporate governance is of paramount importance to a company and is almost as important as its primary business plan. When executed effectively, it can prevent corporate scandals, fraud and the civil and criminal liability of the company. It also enhances a companys image in the public eye as a self-policing company that is responsible and worthy of shareholder and debt holder capital. It dictates the shared philosophy, practices and culture of an organization and its employees.

Principles of Corporate Governance

Shareholder recognition is key to maintaining a companys stock price. More often than not, however, small shareholders with little impact on the stock price are brushed aside to make way for the interests of majority shareholders and the executive board. Good corporate governance seeks to make sure that all shareholders get a voice at general meetings and are allowed to participate. Stakeholder interests should also be recognized by corporate governance. In particular, taking the time to address nonshareholder stakeholders can help your company establish a positive relationship with the community and the press. Board responsibilities must be clearly outlined to majority shareholders. All board members must be on the same page and share a similar vision for the future of the company.

 Ethical behavior violations in favor of higher profits can cause massive civil and legal problems down the road. Underpaying and abusing outsourced employees or skirting around lax environmental regulations can come back and bite the company hard if ignored. A code of conduct regarding ethical decisions should be established for all members of the board. Business transparency is the key to promoting shareholder trust. Financial records, earnings reports and forward guidance should all be clearly stated without exaggeration or creative accounting. Falsified financial records can cause your company to become a Ponzi scheme, and will be dealt with accordingly.