“The system by which companies are directed and controlled in the interest of shareholders and other stakeholders”
Corporate Governance is beneficial for shareholders and all other stakeholders.
Corporate governance will protect the interest of all stakeholders and also the wealth of shareholders
Corporate governance need arises because those that manage the business (Agents) do not own that business but manage the business on behalf of those who own it (Principal).
And directors can take undue advantage of the position and power.
In the private organization CEO& CFO are primarily liable for corporate governance.
In India, CEO& CFO have to submit certificate saying that they have reviewed the financial statements and have ensured the effectiveness of internal controls and other content ensuring corporate governance.
Core principles of Corporate Governance:
Integrity: Is concerned with straightforward dealing and completeness; high moral character; honesty.
Fairness: Is concerned with balance; respecting the rights and views of any group with a legitimate interest.
Judgement: Making complex decisions that enhance the organisation’s prosperity.
Independence: means being free from bias or undue influence; independence of mind and in appearance.
Scepticism: Means considering all parts of business with an open mind; no preconceptions.
Transparency: Providing open and clear disclosure, including voluntary disclosure of reliable information.
Probity: Means being truthful and not misleading; avoiding disingenuous behaviour.
Responsibility: Acknowledgement of praise or blame; open management of errors and failures.
Accountability: Having to answer for the consequence of actions and knowing who that relates to.
Innovation: Change happens and governance must stay fit to purpose regardless.
Reputation: Other people’s perceptions or expectations: a valuable asset of any organisation.