Corporate governance is a field of complex policy, ethics and practice that has numerous stakeholders. It is the system and structures that guarantee accountability, transparency and probity in the company’s operations and reporting. It includes the manner in which boards oversee the executive management of an organization, and the selection, monitoring and evaluation of the CEO’s performances. It also includes how directors make financial choices and how they communicate these decisions to shareholders.
In the 1990s, corporate governance was the subject of much debate due to the implementation of structural reforms aimed at establishing markets in former Soviet states and the Asian Financial Crisis. The Enron scandal in 2002, followed by institutional shareholder activism, and the 2008 financial crisis raised the level of scrutiny. Corporate governance remains a hot topic today with new challenges and new ideas constantly emerging.
The dominant school of thought, referred to as the “shareholder supremacy” view or Anglo-Saxon method, places a higher priority on shareholders. Shareholders choose the board of directors, which directs management and sets strategic goals for the company. The board has the responsibility check out the post right here to select and evaluate the CEO, set and oversee enterprise risk management policies and supervise the operation of the company. They also submit reports on their stewardship to shareholders.
Effective corporate governance is based on four fundamentals such as integrity, transparency accountability and fairness. Integrity relates to the ethical and responsible way board members make decisions. Transparency is about openness and honesty as well as complete disclosure of important information to all stakeholders. Fairness refers to how boards treat employees, suppliers and customers. Responsibility is the way a board treats its members as well as the community as a whole.