CORPORATE GOVERNANCE

Introduction to Corporate Governance



Introduction to Corporate Governance

Introduction

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 (Plessis, 2011, 465).

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 (Plessis, 2011, 465).

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 (Klein, 2005, 769).

Usefulness of Corporate Governance Codes

The global financial crisis has shaken the economies of all parts of the world. The international financial collapse started in the mid of 2007 and proceeded until 2008. The stock markets have fallen immediately in different parts of the world. Not only this, the survival of financial institutions was in danger. The uncertainty and risks in the business transactions exceeded beyond imagination and one after another, many businesses failed. Therefore, the governments of all nations had huge pressures to come up with a strategy to reduce the hazardous impact of the financial crises. One of the initiatives in this regard is an improved system and policies of corporate governance.

The code of good governance or corporate governance should not be seen simply as a regulatory process that is intended to interfere with or regulate processes, but rather as the firm intention to demonstrate to stakeholders and investors that companies are transparent, effective, efficient and above all with a high sense of commitment to be better every day. Good corporate governance should not be considered as an issue than is fashionable, but as the real solution to the crisis of confidence and lack of credibility is perceived around the public sector undertakings and private, which reflect the results of their management operations and financial statements ...