CORPORATE GOVERNANCE

Corporate Governance

Corporate Governance

Introduction

A huge debate is raging the world of governance these days as to how the level of trust can be improved in our communities in regards to the governance bodies of companies, aboriginal communities and charitable corporation. While there are many debates that are presently in progress, the most important ones are playing out in global communities, with other companies taking lead from there (Demb & Neubauer 2002, pp.9). By understanding the different point of views and underlying rationales can help the board of directors to develop practices and policies that improve the governance of their organization and thus improve community's trust in the organisations leadership. (Conti & Warner 2006, pp. 12). This paper is based on good corporate governance that should be adopted by all the companies and the role of different mechanisms of corporate governance. Furthermore, evaluation of the importance of corporate governance, its pros and cons and analysis have also been discussed.

Importance of Corporate Governance

Corporate governance is a process by which direction is given to an organization, the organization is controlled and it is also held to account. This entails that corporate governance covers the accountability, leadership, authority, direction, stewardship and control exercised in the procedure of an organization's management. This definition seems more balanced because it distinguishes the requirement for checks and balances which are employed in the process of organizational management; therefore it can be taken as a more comprehensive definition of corporate governance.

Corporate governance serves to increase investor confidence in the corporate world to facilitate the relationship between shareholders and managers of large companies. It aims to improve the functioning of the corporate bodies. On the one hand, corporate governance seeks to improve the organization's board of directors to keep tabs on the executives, seeking transparency in situations of conflict between the interests of shareholders and managers. For example, managers must report to their salaries and those operations in which the managers themselves become suppliers or customers of the company. On the other hand, focuses on improving the organization and operation of general meetings to facilitate the exercise of voting rights and provide access to social information by minority shareholders.

Corporate Governance deals with finding ways to attract the interest of investors and managers and that these ensure that firms really care about profits for investors. It concerns the relationships between internal governance mechanisms of the organization and the idea that society has regarding corporate accounting. Corporate governance encompasses everything that has to do with the structures, processes, cultures and systems that cause the success of the organization's operations.

Sarbanes-Oxley Act

The Act came into existence in 2002, and the other name given to it is Public Company Accounting Reform and Investor Protection Act. However, more commonly, it is known as Sarbanes-Oxley, Sarbox or SOX. This is a federal law in the US which aims to enhance the standards of all the public companies in the United States. Moreover, it also enhances the management and the public accounting firms. The Act should be implemented to ...