Benefits of Practicing Good Corporate Governance Principles

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Corporate Governance is now being increasingly practiced by companies across the globe due to the number of benefits it offers. Practicing corporate governance is beneficial for a company and its stakeholders as well for the economy as a whole. A few benefits of corporate governance are mentioned below.

Excellent Management

If a company is practicing corporate governance, people not linked to the firm will also be able to assess its governance. This is because the most fundamental principle of corporate governance is transparency and the principles of disclosure. Every step taken by company authorities, having control over the company’s management, is in the best interests of the company and its stakeholders. This has a positive impact on the community and may reflect upon the market valuation of the firm and hence, its share price.

High Level of Transparency

Companies that follow a set of best practices are encouraged to be highly transparent about their business. This helps them attain the trust of the community and its stakeholders and eases the task of raising capital, when needed. As the business is easy to assess and evaluate due to its high level of transparency, many investors and financial institutions prefer funding these companies than those that are not following the core principles of corporate governance.

Stakeholder Benefits

Under corporate governance, a firm tends to act in the best interest of the firm and its stakeholders. This will ensure greater success as the goal of the company managers will now be aligned with the goals of the company. The result of this will be greater profits and faster growth which will benefit the company and all the stakeholders.

Reputation and Recognition

The practice of good corporate governance followed by firms will allow them to gain the trust of the investors, the customers and the community at large. This will have a positive impact on the company’s reputation and it will be recognized as a fair and transparent company. This image will help the company prosper in the long run and achieve its goals more quickly.

Reduces Wastage

Good practices of corporate governance help companies become more efficient in their business. Employees that are trained to follow ethical business practices will avoid excess wastage of company resources will tend to utilize all resources optimally.

Reduce Risks, Mismanagement and Corruption

A company can reduce the amount of risks in their business as well as any attempts of corruption and mismanagement by following the practices of good governance. Due to the amount of transparency necessary in companies that follow the principles of good governance, many individuals intending to misuse their position and power will be unable to do so. This will reduce the overall incidences of negative acts in the company and help it achieve success and a positive image in the community.

Economic Benefit

A company following good corporate governance will be able to achieve the trust of the community and hence, success in the long run. A firm’s good reputation will ensure a good flow of capital by attracting foreign investors in the economy and will benefit the economic situation of the nation.

Further reading: Corporate Governance | Audit | Performance Improvement

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