CORPORATE GOVERNANCE

Corporate Governance

Corporate Governance

Question No. 1

Definition

Corporate governance is a central and a dynamic feature of the business which is derived from the Latin word “Guberance”. It means "to steer" and is related to the steering of the ship. It depends on the way of functioning and controlling of the business. Corporate governance is basically the rules, processes and practices by which company is directed and controlled (Dine, 2000, Pp 36- 45). This helps the regulatory authorities to keep a check and balance on the company. Basically corporate governance is related to the balancing of the interest of stakeholder in the context of a company. In it there are the management, shareholders, customers, suppliers, financiers, community and the governmental agencies. It also provides the framework for achieving the objective of the company. Through it the company can achieve it superior action plan as well as have a sound internal control. This is also helpful for the purpose of performance measurement of the company and its corporate governance.

United Kingdom Corporate Governance

The high quality corporate governance helps the sector to have a long term growth in the performance of the company. It helps the company to have growth oriented future because of the step by step following of the procedures. If we talk of United Kingdom it has got one of the world's most well establish and high standard corporate governance. The positive side of this high standard is that it makes the country a great place for foreign and local investors. This high standard corporate governance brings with it the confidence of the public (Geringer, 1991, Pp. 41-62). The UK code of corporate governance right from its enactment in the year 1992 has been promoting best practices in the board room, this is done by the company through the use of comply or explain policy.

The UK Code of Corporate Governance looks after the companies which are listed on the London's Stock Exchange. The body which is overseeing it is the financial reporting authority. The public companies that are listed on the exchange have to follow the laws set out by the company or explain why a particular law has not been followed (Häcki & Lighton, 2001, pp 26-39). Thus through this way the regulatory agencies are able to set a high standard for these companies and increase the overall investment opportunities by increasing the best practices of the business. The companies that are private are also encouraged to follow the code of corporate governance, but they are not required by the law to make the disclosure of it in the private's company's account. While on the other hand the public companies are required by the law to show its compliance and disclose it in the accounts of the company.

Scope of Corporate Governance

Several areas come under the umbrella of corporate governance. This is because the direct and the indirect effect of the corporate governance is very broad. Some of the areas affected by the CG are as follow

Director Duties

In the initial ...