What is Corporate Governance? Corporate Governance is a generic concept, and in most cases it is defined by its objectives. Corporate Governance can be defined and analyzed by two terms. The first was introduced by the Organization of economic Corporation and Development (OECD 1999). OECD defined “Corporate Governance as a system in which business corporations are directed and controlled. The Corporate Governance structure specifies the distribution of rights and responsibilities among the different participation of the corporation such as the Board of Directors, Managers, Shareholders, and other Stakeholders and spells out the rules and procedures for making decisions on corporate affairs. By doing this it also, provides the structure through which the company objectives are set, and the means of attaining those objectives and monitoring the performance. According to the OECD definition Corporate Governance mainly focuses on corporate control, identification of authorities and responsibilities; identifying corporate goals and the proper procedures of attaining such goals and the share of power by all stakeholders and other means necessary”. The second definition was introduced by the World Bank (WB 2000). World Bank defines Corporate Governance as “being concerned with holding the balance between the economic and social goals and between individual and communal goals. It further states that corporate governance is there to encourage the efficient use of the resources and equally to require accountability for the stewardship of those resources. The aim is to align as nearly as possible the interest of individuals, corporations and society.” The World Bank primarily focuses on attaining the goals of the corporation. That is expected from them since it has a global development objective and the alignment of the diverse interests of the corporation, community, shareholders and management. In 1999, the OECD published it Principles of Corporate Governance, and were the first international code of good Corporate Governance approved by government. Given both definitions the principles of Corporate Governance demonstrates the same relationships. * shareholders should fully participate in the management of the Company through shareholder meetings; * shareholders should share in the Company’s profits;
* shareholders should benefit from high liquidity levels for stock transactions; * corporate conduct shall provide timely disclosure of full and true information about the Company, including its financial status, economic indicators, and the ownership and management structure, in order to provide shareholders and investors with the ability to make well-founded decisions in a timely manner; * the Board of Directors, who is accountable to shareholders, is responsible for the strategic management of the Company and exercises effective control over the activities of the executive bodies of the Company; * the Board of Directors shall decide the strategic decisions of the Company and exercise effective control over the financial and economic activities of the Company; * the Board of Directors shall meet regularly in accordance with an agreed timetable; * committees of the Board of Directors shall review all significant issues; * all executive bodies shall act in accordance with the financial and economic goals of the Company; * remuneration of the General Director and corporate executives shall be made according to their qualifications and taking into account their actual contribution to the Company’s results; * tight control shall be exercised over the confidentiality of information; * in order to ensure effective operations, the management bodies shall always consider the interests of third parties, including the Company’s creditors, government, and municipal institutions on whose territory the Company or its subsidiaries are located; * the management bodies of the Company...
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