Corporate Governance Definition
Corporate governance refers to the set of rules, processes, and practices by which a company is directed and controlled. Corporate governance encompasses all of the mechanisms by which shareholders, directors, management, and other stakeholders exert influence over the direction and operation of the company.
The goal of corporate governance is to ensure that the company is run in a manner that is transparent, accountable, and in the best interests of all stakeholders. Good corporate governance helps to create an environment in which companies can flourish and generate long-term value for shareholders.
There are many different aspects to corporate governance, but some of the most important include:
– Board composition and structure: The board of directors is responsible for setting the strategic direction of the company and ensuring that it is managed effectively. The board should be composed of a mix of independent (outside) directors and inside directors (executive officers or major shareholders).
– Shareholder rights: All shareholders have certain rights with respect to their investment in the company. These include the right to vote on major corporate decisions, elect the board of directors, receive dividend payments, and participate in shareholder meetings.
– Disclosure and transparency: Public companies are required to disclose certain information about their financial condition, business dealings, and executive compensation. This helps shareholders make informed investment decisions and also holds management accountable for their actions.
– Code of conduct: Most companies have adopted codes of conduct that set forth expected standards of behavior for all employees.
