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Corporate governance refers to the set of rules, regulations and processes by which an organization is operated, regulated and controlled. An organization has the responsibility of meeting the interests of its stakeholders, such as the directors, investors, customers, employees, etc. In order to make sure that the organization does not deviate from its intended path, the corporate governance determines a set of rules and regulation for the firm to follow. Corporate governance can also be referred to as the interaction between various stakeholders, in determining organizational performance and its future goals. In this article we have discussed about what is corporate governance, its implications and its roles behind organizational success. It can help you to have a strong understanding on the basic foundation of corporate governance for your college essay.

Understanding Corporate Governance

Before we dig deeper into the nuances of corporate governance, it should be mentioned that there is no single globally accepted definition that can be followed by every organization. A browse through scholarly articles have revealed that most definitions of corporate governance focuses on accountability, particularly accountability to the shareholders and the ability of the organization to follow its country’s legal system to protect the interest of its stakeholders. Thus, if you are looking for a streamlined definition, it is likely to vary significantly from one country to another. However, we have presented a holistic definition of corporate governance, which encompasses all the common characteristics to present a broad overview.

In a broader perspective, corporate governance is defined as, “the internal and external system of checks and balances, which makes sure that organizations discharge their accountability to all of its stakeholders and to operate in a socially responsible manner in every aspect of its business operations.” In this definition, the term ‘stakeholders’ refers to every entity that is influenced by the business operations of the company. Typically, the board of directors are responsible for the building the framework for the corporate governance which helps in aligning the business activities with the corporate governance objectives.

Corporate Governance Guiding Principles

As mentioned earlier, corporate governance allows a firm to operate in such a way so that it can take care of the interest of its stakeholders and run the business venture in a sustainable and accountable manner. For your assignment help, we have underpinned the key guiding principles of corporate governance.

  • The board of directors approves the corporate strategies that can help the organization to develop long term and sustainable value. The set strategies must focus on the long-term development, rather than taking a myopic approach to meet short term financial goals. The board also oversees the activities of the CEO and the higher management, including capital allocation for various business activities.
  • The higher management develops corporate strategies under the oversight of the board, which are focused on creating sustainable value for the company.
  • Under the oversight of the board and the audit committee, the higher management produces financial statement representing the transparent financial condition of the company. The aim here is to communicate with the shareholders about how the company has been doing financially in the past year. It also highlights the soundness of the business and any associated financial risks. It is the responsibility of the organization to report its financial status accurately so that the investors and shareholders can informed decisions regarding their investments.
  • The audit committee within an organization bears the responsibility to control its financial reporting and to also manage the relationship of the firm with outside auditors. It also oversees the risk management and regulation compliance of the organization.
  • The corporate governance committee of the board plays a crucial role in determining the corporate governance practices in the organization. It is also responsible for creating a diverse and engaged board whose composition is most suitable for the given organization.
  • The compensation committee of the board has the responsibility in designing the compensation packages of the CEO and the higher management. The compensation should appropriately the support and encourage the value centric job roles of the employees.
  • The board of directors and the higher management should take necessary steps to engage with the long-term shareholders and investors to discuss about the concerns and wide-spread interests that can impact the value creation of the company.
  • As major decisions are being made, the board may consider the inclusion of all the employees, in an effective manner so as to involve them in the decision-making process. In this case, the company is also driven to consider the interests of all of its stakeholders, while taking any small or big decisions.

The core purpose of the building a robust corporate governance is to protect the organization from itself. In other words, the corporate governance regulations and practices enable a firm to take care of the interest of all of its stakeholders, while focusing on sustainable development and value creation. The enforcement of the regulations makes sure that the company does not resort to any unethical or illegal means to run its business which can be quite detrimental for the shareholders in the long run. In this context, we have listed the key advantages of corporate governance to help you with your writing papers in college.

Advantages of Corporate Governance

Following a good corporate governance can help a firm achieve long term sustainability and strong competitive advantage. Here are some of the main benefits of corporate governance that you should be aware of:

  • Good corporate governance practices ensure organizational success and economic growth.
  • It helps in fostering confidence among the investors, thereby allowing the firms to raise its capital, which is crucial for its financial sustainability.
  • It helps in lowering the cost of capital.
  • Strong positive impact on the company‚Äôs equity is quite evident.
  • The organization becomes more focused on meeting the interests of the shareholders and also the organization.
  • Good corporate governance makes business operations more efficient by reducing wastage of resources and lowering risks
  • Corporate governance of a firm also helps in creating strong brands which can attract potential customers and investors.

To Summarize

Before you go and ask someone, write me a paper, let us help you catch up what we have learnt in this article. Corporate governance of an organization is the set of rules and regulation that an organization follows in its business venture to cater to the interests of all of its stakeholders. It compels an organization to act in its best interests, which involves creating long-term sustainable value. Corporate governance makes an organization more accountable for its actions.The corporate governance principles that we have covered in the article can help a firm to operate in the most ethical and sustainable manner, while taking care of the interest of its stakeholders.

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