Corporate Governance

Topics: Corporate governance, Board of directors, Corporation Pages: 17 (4004 words) Published: January 21, 2011


This report is submitted as a partial compliment for the Risk and Control Strategy module of the BBA degree’s 4th Semester


Table of Contents

1. Introduction

2. What is Corporate Governance?

3. Corporate Governance Today

4. Reports on Corporate Governance

5. Areas of governance highlighted by Corporate Governance Reports

5.1. Role of the Board of Directors

5.2. Attributes of the Board of Directors

5.3 Composition of the Board of Directors

5.4. Remuneration for the Board of Directors

5.5. Internal Control and Risk management

5.6. Relations with Shareholders and other Stakeholders

5.7. Reporting on Corporate Governance and Disclosures

6. Impact of these reports on the increasing significance of Corporate Governance

1. Introduction

The concept of corporate governance involves the development of clear systems to ensure that all business entities are managed and controlled in a way that ensures the best interests of the shareholders (the owners) are protected.

As a concept, corporate governance came into prominence during the 1970s and ‘80s particularly in the developed world due to the increased level of globalization and internationalisation that led to shareholders and investors demanding for a more transparent and regulated approach to organisational management and the reporting of entity performance. Its significance was also brought to light following the high profile corporate scandals and collapses that plagued the business world, which severely eroded investor confidence in how their companies were being directed by the board and management.

These scandals over the last 25 years highlighted the need for some clear guidance to tackle the various risks and problems that can arise in organisations’ systems of governance. This prompted the development of various corporate governance codes of conduct providing companies with a framework of best practice guidelines to follow to ensure better supervision, improved corporate performance and protection against the misuse of company resources. These codes of conduct have been in the form of corporate governance reports prepared by committees assigned with the task of analysing existing governance systems and coming up with best practices to ensure good governance.

This report will analyse how each of these published reports on corporate governance have contributed to the increased awareness of this subject in the corporate world and the increased adoption of corporate governance best practices by business entities the world over.

It will also analyse the impact these reports on corporate governance are having on companies today and how it has altered the way companies are governed and managed.

2. What is Corporate Governance?

Corporate Governance could be defined as the overall system by which organisations are directed and controlled. It is concerned with systems, processes, controls, accountability and decision making within an entity i.e. how managers execute their authority and responsibilities and how they account for it.

Although this area is discussed mostly in relation to large quoted companies, governance is an issue relevant to all corporate bodies, commercial as well as not-for-profit.

Having good corporate governance i.e. a proper system in place to ensure the entity is managed and controlled in line with corporate best practices to ensure that the interests of all stakeholder groups are protected and power is not abused, is essential for companies in order to achieve the following.

▪ To minimise financial, legal and reputation risk; by requiring compliance with accepted good practices of...
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