Corporate governance is the set of processes, customs, policies, laws, and institutions affecting the way a corporation is directed, administered or controlled. Corporate governance also includes the relationships among the many stakeholders involved and the goals for which the corporation is governed. The principal stakeholders are the shareholders, management, and the board of directors. Other stakeholders include labor(employees), customers, creditors (e.g., banks, bond holders), suppliers, regulators, and the community at large. These are some definitions given under the Corporate governance; The simple meaning of the Corporate governance is the relationship between corporate managers, directors and the providers of equity, people and institutions who save and invest their capital to earn a return. It ensures that the board of directors is accountable for the pursuit of corporate objectives and that the corporation itself conforms to the law and regulations. - International Chamber of Commerce
"Corporate Governance is concerned with holding the balance between economic and social goals and between individual and communal goals. The corporate governance framework is there to encourage the efficient use of resources and equally to require accountability for the stewardship of those resources. The aim is to align as nearly as possible the interests of individuals, corporations and society “ "-(Sir Adrian Cadbury in 'Global Corporate Governance Forum', World Bank, 2000)
Company’s financial statement is very important for the external users especially investors to make a decision and understand the business. Figures in the financial statement may not be very helpful, therefore, most of this investors will rely more on the disclosures or notes provided in the financial statement. Basically, SLFRS promote corporate governance through this additional information by providing relevant and reliable information. In the notes, only information that is material to the investors only will be put in because company cannot disclose everything. Generally, these notes will explained details those figure reported, so that when it comes to the investors, they may understand better. Unfortunately, is the management prepared to disclose all the sensitive matter to investors which they know it will affect the investors to make some decision in investment? This would be one of the aspects in corporate governance. Good corporate governance practices are not a new phenomenon in the world although recent collapses of several companies which were considered successful, have emphasized the need for good business practices and governance structures. These structures and processes are especially important for the success of business as it brings in better risk management practices through enhanced accountability and transparency. It also promotes the development of the community, the economy of the country and ensures a better relationship between the company, its shareholders, employees and the community.
Throughout this assignment we had planned to gather a broader knowledge about the Corporate governance best practices which can be implemented in Sri Lankan context and to had take Two major companies in Sri Lanka to examine there Corporate governance best practices and to check whether those practices are comply with the best practices which are introduced by Institute of Chartered Accountants of Sri Lanka.
Best Practices on Corporate Governance and Their Importance
1. Developing a Compliance Mentality
As the executive director, or chief executive officer, of a company, you have the responsibility to your shareholders, creditors and to the public to comply with all government rules and regulations, and to express to your subordinates, whether junior management or employees, that compliance is not a mere option but a requirement. You must send a message to the company that all its members must transact the business of...
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