Introduction
Corporate Governance is a system which involves the building of a set of relationships between the company, its board, the management, the shareholders and other stock holders by putting in place a structure and a system through which the goals of the company may be achieved.
The governance structure operates as follows:
- The company’s board of director are responsible for the governance of their companies
- Board of directors give directions to management for the day-to-day implementation and operations.
- The role of shareholders of the company in governance is to appoint directors and auditors
Benefits of Corporate Governance
- Good corporate provides guidance to leadership, creates transparent rules and controls, and also aligns the interests of shareholders, directors, management, and employees.
- Good corporate governance minimizes wastage, corruption, risks and mismanagement of the company.
- It helps build trust with investors, the community, and public officials.
- Corporate governance can provide stakeholders and investors a clear idea of a company’s direction and business integrity.
- It ensures corporate success and economic growth of the company.
Corporate Governance Aspects (Principles)
Governance and Board of Directors:
- The directors are required to disclose leadership which is responsible in setting up the mission and vision of the company
- They need to think out the long term strategic plan for facilitating the long term success of the company and lay down the company’s policies
Accountability
The board have to explain the purpose of a company’s activities and the results of its conduct. The directors are required to take proper care for the maintenance of adequate accounting records.
Transparency:
Transparency is an essential component at all levels of business, especially at the top level management, where major decisions of companies are made and where major plans are formulated. Keeping the investors and other stakeholders informed which helps in building up a relationship of trust and solidarity that results in the rewards of a higher valuation and easy access to funding.
Policy and procedures:
The Companies Act makes for the following procedures:
- Annual General Meetings (AGM) is required to be held once a year by all the companies except one person company for approval of the financial statements, to declare dividend and to appoint directors and auditors of company.
- Making information available on the website enables fair and timely disclosure.
- Annual report contains the financial and non- financial disclosures which should include charting of the company’s progress towards its goals.
Conclusion:
Corporate governance is system of structure to direct the company. It provide investor and stakeholder with clear idea of company’s objective and business integrity. Company Law is backbone of corporate governance. Company law provide legal framework for governance of companies it mandates the board to be important governing body, it deals with the power, board process and procedure for decision making, communication and disclosure to stakeholder. If you have doubt regarding this topic you can connect on company suggestion.
