Corporate Governance framework
Corporate Governance framework
Corporate governance is the system of rules, practices and processes by which a firm is directed and controlled. Corporate governance essentially involves balancing the interests of a company's many stakeholders, such as shareholders, management, customers, suppliers, financiers, government and the community. Since corporate governance also provides the framework for attaining a company's objectives, it encompasses practically every sphere of management, from action plans and internal controls to performance measurement and corporate disclosure.
Principles
Corporate governance is the way a corporation polices itself. In short, it is a method of governing the company like a sovereign state, instating its own customs, policies and laws to its employees from the highest to the lowest levels.
- Shareholder recognition
- Stakeholder interests
- Board responsibilities must be clearly outlined
- Ethical behavior
- Business transparency
Importance
- Investors and shareholders of a corporate company need protection for their investment
- Important means for paying heed to investors’ grievances.
- It will enable the corporate firms to (1) attract capital and (2) perform efficiently.
- Important factor for attracting foreign investment.
- Indispensable for a vibrant stock market.