‘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.”
“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.