Corporate governance is a set of rules, principles, regulations, or processes through which companies are controlled and directed. The need for corporate governance arose due to various corporate failures in the past. Therefore, by following these rules and principles, companies can regulate their processes better. Corporate governance applies to both a company’s daily operations to management or strategic activities.
Every company may have policies, rules, or principles which dictate how it functions. These policies differ for each company. However, there are some areas within companies that operate similarly. Furthermore, some areas within a company are critical and need proper attention. Some companies may view corporate governance as an unnecessary and costly process. However, a proper corporate governance system has many advantages. While corporate governance can benefit companies, its importance relies on how companies use it. As mentioned, corporate governance defines the rules, principles, and regulations that companies can use for control and direction. But for these to be effective, companies must use them properly. #1. Minimize Agency Problems Agency…
Good corporate governance will ensure that the board of directors meet regularly, retain control over the business and are clear in the division of their responsibilities, as well as maintaining a system of risk management. Corporate governance is the cornerstone of any good business. It encompasses the processes, practices and policies that a company relies on to make formal decisions and to manage the company. The Oxford University Press Business English Dictionary defines corporate governance as the “way in which directors and managers control a company and make decisions, especially decisions that have an important effect on the shareholders.” The concept of corporate governance is becoming increasingly important for companies. At…