DEFINING CORPORATE GOVERNANCE
Governance refers to the new way in which something is governed and to the function of governing. The governance of a country, for example, refers to the powers and actions of the legislative assembly, the executive government and the Judiciary.
Corporate governance refers to the way in which companies are governed, and to what purpose. It is concerned with practices and procedures for trying to ensure that a company is run in such a way that it achieves its objectives. This could be to maximize the wealth of its owners (the shareholders), subject to various guidelines and constraints and with regard to the other groups with an interest in what the company does. Guidelines and constraints include behaving in an ethical way in compliance with laws and regulations.
Some other definitions that have been provided are as follows:
‘Corporate governance is the system by which companies are directed and controlled’ (Cadbury Report, 1992). The Cadbury Report was a major UK inquiry into corporate governance, and this is a generally accepted definition.
Governance is about seeing that is run properly. All companies need governing as well as managing ‘(Professor Bob Tricker, 1984). Corporate governance is concerned with how powers are shared and exercised by different groups to ensure that the objects of the company are achieved.
Key issues in the corporate Government the rights of the shareholders and other interest groups such as the employees, how powers are shared and exercised by the directors, and the holders of power in a company
A company is a ‘legal entity’. As a person, it is able to enter into contracts and make business transactions. It can own assets and owe money to others, and it can sue and be sued in law. Human beings have to make decisions and arrange transactions in the