CORPORATE GOVERNANCE – ITS PRINCIPLES, PRACTICES & VALUES
Corporate Governance has recently received much attention due to Adelphia, Enron, WorldCom, and other high profile scandals, serving as the impetus to such recent U.S. regulations. Corporate Governance is well established as a global issue and recent high profile corporate failures have brought renewed focus on the importance of good corporate governance leading to broadened interest in the topic.
Corporate Governance is not a science subject to immutable rules. It is a culture of relationships. Whether or not it works depends on how its participants behave and interact with each other. Good governance comes from developing the right, relationships among the right people. It requires that participants have the right information and knowledge as well as the incentives and ethics to do the right thing. Corporate governance has been in place for ages and still in modern day corporate world we wee fiascos like Satyam taking place in modern India, which really raises doubt about our financial and commercial ethics, and make us look bad in the world.
To be more precise it involves series of principles and recommendations to be followed by the management of listed companies.
Corporate governance provides a firm foundation for the development of economies. A good corporate governance mechanism improves the health of the corporate sector, thus enhancing national competitiveness. The self-regulatory organisations of various countries have extensive experience in promoting corporate governance and creating a positive corporate governance culture.
Features of corporate governance
Started as economic or financial concept Involves lot of parties Involves organisational and social objective Guiding practices, process and principles Used to motivate management to perform better Universal approach Framework of rules, relationships, systems and processes Implemented at all levels in an organisation Tool for benchmarking and controlling performance Focuses on long term value addition
Objectives of Corporate governance
The concept of corporate governance is multi faceted and involves lot of dimensions therefore it covers several objectives rather a wide range of objectives ranging from managing and maintaining operational transparency to something as simple as following legal mandatory disclosure norms.
Corporate governance is the set of rules and procedures that ensure that managers do indeed employ the principals of value based management. The essence of corporate governance is to make sure that the key shareholder objective-wealth maximization is implemented. Most corporate governance provisions come in two forms, sticks and carrots. The primary stick is the threat of removal, either as a decision by the Board of Directors or as the result of a hostile take over. If a firm’s managers are maximizing the value of the resources entrusted to them, the need not fear the loss of their jobs
Corporate governance – New Developments
Corporate governance guidelines and best practices have evolved over a period of time. The Cadbury Reports on the financial aspects of corporate governance, published in the UK in 1992, was a landmark.
Alian Cadbury reports listed the following tools as instruments for corporate governance.
Codes Principles Standards
March 14 2011 | Economic And Financial Crisis | Comments Off