Corporate Governance
‘The
proper governance of companies will become as crucial to the world economy as
the proper governing of countries.’
Jeames Wolfenson, President of World Bank, 1999
Corporate Governance is the system by
which businesses are directed and controlled in the best interests of all
stakeholders. Corporate Governance lays emphasis on ethics, fair business
practices, transparency, discloser and conduct of business for the benefit of
all stakeholders.
Corporate governance specific the rights
and liabilities of different group of people like the chief executives,
directors of the board, managers of different departments and other
stakeholders. This helps to provide the structure through which the objectives
of the company formulated and their performance is monitored.
Corporate Governance maintains balance
among individual goals, societal goals, economic goals and social goals. For
example companies like Infosys, Wipro, Reliance, Hindustan Uni Lever Ltd. etc.
have implemented corporate governance codes which ensure ethical and efficient
conduct leading to their development.
There are different definitions
contributed by various authors. Some important definitions are as follows.
“Corporate governance is about promoting
fairness, transparency and accountability.”
-World Bank
“Corporate governance is defined as the
system by which companies are directed and controlled.”
- Cadbury committee
Balanced economic development is made
possible through transparent management under corporate governance. All
Stakeholders interests are protected and promoted through corporate governance.
Some of the benefits of corporate governance are as follows
1.
Good corporate governance enables
corporate success and economic development.
2.
Ensures stable growth of organizations.
3.
Aligns the interests of various stakeholders.
4.
Improves investors’ confidence and
enables raising of capital.
5.
Reduces the cost of capital for
companies.
6.
Has a positive impact on the share price
7.
Provides incentive to managers to
achieve organizational objectives.
8.
Eliminates wastages, corruption, risks
and mismanagement.
9.
Improves the image of the company.
10.
The organization is managed to benefit
the stakeholders.
11.
Ensures efficient allocation of
resources
12.
Creates a strong brand as an ethical
business.
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