Corporate Governance

Knowledge Center





Summary, forum, best practices, expert tips and resources.

 

What is Corporate Governance? Meaning.


Corporate Governance is the whole of all policies, procedures and rules directing and controlling a company, governing the relationships between its shareholders, (stakeholders), directors and management, as defined by the applicable laws, the corporate charter, the company's bylaws, and formal policies.

 

Primarily it is about managing top management, building in checks and balances to ensure that the senior executives pursue strategies that are in accordance with the corporate mission.

 

It consists of a set of processes, customs, policies, laws and institutions affecting the way a corporation is directed, administered or controlled.

 

Organizations should respect the rights of shareholders and help shareholders to exercise their rights. But also organizations should recognize that they have legal, contractual, social, and market driven obligations to non-shareholder stakeholders, including employees, investors, creditors, suppliers, local communities, customers, and policy makers.

It is extremely difficult to serve and protect the interests of all stakeholders under one common denominator.

That's why the corporate governance structure of a firm aims at creating a force field in which future behaviors and decisions will lead to maximum wealth generations for the shareholders, considering the interest of all stakeholders.  In other words: corporate governance governs the relationships among the many players involved (the stakeholders) and the goals for which the corporation is governed. The principal players are the shareholders, management and the board of directors. Other stakeholders include employees, suppliers, customers, banks and other lenders, regulators, the environment and the community at large.


3 Functions of Corporate Governance (Trickler, 1994):

  1. Forming function: influence the forming of the corporate mission. A related important part of corporate governance deals with accountability, fiduciary duty and mechanisms of auditing and control. In this sense, corporate governance players should comply with codes to the overall good of all constituents.

  2. Performance function: help improving the performance of the company, by judging strategy proposals brought forward by the top management or even actively participating in the strategy formation process. A related focus is economic efficiency, both within the corporation (such as the best practice guidelines) as well as externally (national institutional frameworks). In this "economic view", the corporate governance system should be designed in such a way as to optimize results. Some argue that the firm should act not only in the interest of shareholders, but also of all the other stakeholders.

  3. Conformance function: ensure and monitor conformance to the corporate mission and strategy.

Note that the term "Corporate Governance" actually has multiple meanings:

  • A legal meaning, depending on the country where a firm resides or operates.

  • The processes by which companies are directed and controlled.

  • Encouragement of companies' compliance with codes (as in corporate governance guidelines).

  • A field in economics, which studies the many issues arising from the separation of ownership and control.

  • The framework of rules, relationships, systems and processes within and by which fiduciary authority is exercised and controlled in corporations.

Corporate Governance regimes differ considerably between countries. In designing a corporate governance regime, 3 issues are particularly relevant (Trickler, 1994)

  1. Board Structure (Two-tier / One-tier)

  2. Board Membership (are employees represented or not)

  3. Board Tasks and Responsibilities

The interest in Corporate Governance is seasonal, it can be said that low stock market levels are conducive for more attention for the governance practices within corporations. A recent example were the high-profile collapses of such firms as Enron and WorldCom and the burst of the Internet Bubble which let to a lot of attention for the topic, especially to Corporate Governance Rating. Critics said however that had Sarbanes-Oxley preceded Enron they probably would have checked the boxes on that too.


Corporate Governance is strongly related to other concepts such as Corporate Transparency, Corporate Accountability, and Corporate Responsibility.


Corporate Governance Special Interest Group


Special Interest Group (391 members)


Forum about Corporate Governance  

Discussions about Corporate Governance.


Internal and External Corporate Governance
Corporate Governance (CG) can be viewed as the system by which companies are directed and controlled. Also companies can (...)
 
 
 
 
Dealing with non-profit Board of Directors
Question: is there a book/section/something that specifically addresses dealing with a non-profit's board of directors? (...)
 
 
 
 
Corporate Culture Vis-a-vis Societal Culture
Many of the individual features of corporate culture models such as the have the same descriptors as in societal/nation (...)
 
 
 
 
HR Involvement in CG
What is the role of the HR Director in corporate governance? (...)
 
 
 
 
Corporate Governance and Strategy
How is corporate governance related to strategic management in an organization? (...)
 
 
 
 
Governance in Public Sector Organisations
I would like to share with you my ideas regarding my DBA thesis, the aim of my study is to determine and analyse the bar (...)
 
 
 
 
Culture and Corporate Governance
I would be interested to read viewers' comments on culture-based differences in the ways senior managers' strategies for (...)
 
 
 
 
Corporate Governance Aims
Any corporate governance framework has at least 3 purposes:
  1. TRANSPARENCY: Board is telling what is going on
 
 
 
 
A Global Corporate Governance Body is Needed
Businesses and banks are operating globally. This means their visions, missions, goals, strategies and operations change (...)
 
 
 
 
Corporate Governance Rules and Ethics
What has happened is that people have taken and extended the proverb "Everything is fair in love and war", into: 'Everyt (...)
 
 
 
 
Why Should a Firm have Procedures and Policies?
Why is it important for companies to have policies and procedures? I'm currently in a course for leadership management a (...)
 
 
 
 
🔥 NEW Challenges in Corporate Governance in Africa
What are the challenges facing corporate governance in Africa and how can those challenges be eradicated? (...)
 
 
 
 
Maintaining Creativity and Flexibility Despite of Corporate Governance Mechanisms
Once a structure is in place and a firm is accomplishing its goals, the measure of success for an even better future may (...)
 
 
 
 
Governance versus Management
What is the key difference between management and (corporate) governance? Well, in essence: - Management (M) involves t (...)
 
 
 
 
Corporate Governance and Compliance
My current research is currently exploring the difference between corporate governance concepts and compliance. These tw (...)
 
 
 
 

Best Practices about Corporate Governance

Here you find the most valuable discussions from the past.


🥇 Agency Theory: Principal-Agent Problems
I need to understand the principal-agent problems that arise in organisations. Thanks... (...)
 
 
 
 
🥈 Corporate Governance: One-tier versus Two-tier Boards
Somebody asked me the other day for the differences between the two main corporate governance systems (1-tier and 2-tier (...)
 
 
 
 
🥉 Europe Reaches Agreement on Banking Supervisor: Curse or Blessing?
On 12-12-2012, the European Economic and Financial Affairs Council (the Ministers of Finance of the European Unio (...)
 
 
 
 
Why the Interest in Corporate Governance Today?
According to my own understanding, corporate governance are the rules, regulations governing the running of an instituti (...)
 
 
 
 

Expert Tips about Corporate Governance

Here you will find advices by experts.


Effective Top Management Teams in Multinationals. Requirements and Characteristics

Board of Directors, Leadership Teams, Multinationals, Top Team Management (...)
 
 

How Long Should a CEO Remain in the Job?

CEO Performance, CEO Life Cycle, CEO Tenure, CEO and Board Relation (...)
 
 

Stock Buybacks as a Means of Value Extraction

Stock Buybacks, Stock Repurchases, Corporate Profitability, Economic Prosperity, Executive Compensation, EPS (...)
 
 

Corporate Responsibility Committee

Corporate Responsibility, Corporate Sustainability, Strategic Innovation, Corporate Governance (...)
 
 

Information Sources about Corporate Governance

Here you will find powerpoints, videos, news, etc.


The Purpose of Business: Stockholder versus Stakeholder Theories

Stakeholder Analysis; Stakeholder Commitment (...)
 

The Issues Around CEO Compensation in the US

Executive Compensation, Executive Performance Management, Executive Pay (...)
 

The Board of Directors: Roles, Responsibilities and Duties

Board of Directors, Corporate Governance, Board Accountability, Director Liability (...)
 

Principles of Successful Corporate Governance

Corporate Governance, Corporate Accountability (...)
 

Corporate Governance: What Role does the Board of Directors Have?

Corporate Governance, Board Governance, Chairman of the Board, Corporate Secretary (...)
 

Ethics in Corporate Governance

Ethics, Corporate Governance (...)
 

Weaknesses of Stakeholder Theory of Corporate Governance. CONs

Discussion on Corporate Governance, Stakeholder Management (...)
 

Interview W. Ouchi: Governance versus Management

Introduction to Corporate Governance (...)
 

Compare also: Compliance Officer  |  Corporate Mission  |  Shareholder Value Perspective  |  Stakeholder Value Perspective  |  Chairman of the Board  |  Chief Executive Officer  |  Directors and Officers Liability Insurance

Special Interest Group Leader

You here? Sign up for free


 
 

Return to Management Hub: Change & Organization  |  Ethics & Responsibility  |  Leadership  |  Strategy


More on Management  |  Return to Management Dictionary  | 

 

This ends our Corporate Governance summary and forum.



About 12manage | Advertising | Link to us / Cite us | Privacy | Suggestions | Terms of Service
2020 12manage - The Executive Fast Track. V15.4 - Last updated: 9-4-2020. All names of their owners.