What is corporate governance
Corporate Governance is the set of rules and processes controlling and guiding the corporation. It specifies the rights and responsibility of the many stakeholders of the corporation. Example of stakeholders includes board of directors, shareholders, creditors, customers, governing bodies and communities.
Rules to resolving conflicts between stakeholders
The rules laid out within Corporate governance is key to resolving the conflict of between stakeholders. One key situation will be between shareholders and executive management in the decisions of dividend distribution. Another example takes place between shareholders who have different views on how the company should be run.
Processes of how objectives are set and how to achieve them
Corporate governance also includes the processes and frameworks of how the corporation arrive at their objectives and how the corporation is going to achieve them in the environment it is operating in (action plan), while satisfying the regulatory and community requirements. It includes other checks and balances such as internal control and performance tracking.
Communication of corporate governance and adherence
Communicating a corporation’s corporate governance in detail is key to investor relations and confidence. For many shareholders a company has to be profitable, but it also needs to demonstrate its robust corporate governance practices and its adherence to it. Good corporate governance creates a transparent set of rules and controls in which stakeholders follow to keep the corporation going.
Pillars of corporate governance
Corporate Governance encompasses much items. Good corporate governance has to be held up by these 3 key pillars:
- Transparency
- Accountability
- Fairness
In the next article we will look at how we can build the 3 pillars necessary for implementation of good corporate governance. We will explore the use of systems such as Document Management System EDMS & Board Management Software that can materialise these pillars.
