Corporate Governance and Responsibilities


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Corporate Governance: Is defined as the system in which companies implement compliance with best practices to ensure control and management. There are boards of directors who are responsible for governance of the company.

Stakeholders are the ones that assign directors and auditors so as to ensure satisfaction through appropriate governance. This means there will be best practices with a defined governance structure throughout the company. Moreover, the board of directors will have to follow a set of guidelines in compliance with regulations and laws. Whatever decisions the board of directors come to, it must be in compliance with the interests of the stakeholders. This is why it is mandatory that stakeholders attend every general meeting that holds in the company.

The company can be public or private. When it is a public company there are certain circumstances that warrant listing shares and stock exchanges or investments made in the market. Corporate governance rules are applicable for both public and private companies. When a company is large and complex, more scrutiny and close monitoring of all processes is necessary. When a company is international or multinational, it requires corporate governance rules and regulations that extend across the border.

Aim of Corporate Governance

Corporate governance aims to protect the interest of the company’s shareholders. At the same time, its goal is to preserve the company’s reputation. It also ensures that action is taken against any fraudulent activities committed by officials and directors of the firm. Therefore, corporate governance means directors must take decisions without prejudice and ethically; keeping the company and shareholders’ interest in mind.

Advantages

  • Company is well monitored
  • Ensures mitigation of fraudulent activities in the company
  • Established a proper system and order in the company

Disadvantages

  • Corporate governance best practices gets more intense with size of the company
  • More compliance challenges with implementation of corporate governance
  • Excessive supervision restricts independence of directors to run the company with their own judgment

Requirements for Corporate Governance

  • Directors must be well informed about corporate governance regulations and best practices.
  • Directors must be ready to face risk management and auditing challenges throughout the company.

Corporate Governance Dos and Don’ts

DO Seek the advice of accountants and legal advisers to help establish a proper risk management and auditing system. There must be no breach of regulations and best practices.

DON’T ignore rules surrounding corporate governance. Consequences of failure of best practices with rules can lead to criminal activities. This will require accountability of directors.

DON’T ignore the importance of establishing a system that deals with breach of regulations.

These are recommended best practices corporate governance and responsibilities that directors must ensure compliance with.

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