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Introduction. corporate – Oxford English dictionary – relating to large company or group Latin – corporatus and corporare , ‘from into a body’, from corpor and corpus, ’body’, which is the same origin as corpse French- English – crops, ‘the group of select people, such as ballet troop’
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Introduction corporate – Oxford English dictionary – relating to large company or group Latin – corporatus and corporare , ‘from into a body’, from corpor and corpus, ’body’, which is the same origin as corpse French- English – crops, ‘the group of select people, such as ballet troop’ Governance – Govern – conduct the policy, actions and affairs of (a state, organization, or people) with authority The action or manner of governing a state or organization, etc. Therefore literally and essentially the definition of corporate governance is the directing of a large organization.
Definitions In a narrow sense, it involves – a set of relationships amongst the company’s management, its board of directors, its shareholders, its auditors and other stakeholders various rules and incentives the key aspects of good corporate governance include transparency accountability responsibility
In a broader sense, - important for overall market confidence the efficiency of capital allocation the growth and development of countries’ industrial bases ultimately the nations’ overall wealth and welfare
The Cadbury Committee “(It is) the system by which companies are directed and controlled.”It may also be defined as a system of structuring, operating and controlling a company with the following specific aims:- (i) Fulfilling long-term strategic goals of owners (ii) Taking care of the interests of employees(iii) A consideration for the environment and local community (iv) Maintaining excellent relations with customers and suppliers (v) Proper compliance with all the applicable legal and regulatory requirements
Principles of corporate governance also apply to: public services organizations small business and co-operatives social enterprises Corporate governance is truly global concept Grew up as concept in response to scandals of the late 1900s
Some examples of scandals are: • Polly peck collapse- imploded in 1990 with debts of pound 1.3bn and claim of gross mismanagement and fraud • Guinness scandal – a share price miss manipulation fraud of 1980s • Global finance crises of 2007-8 and resulting global recession of 2007-13 • Enron – world’s biggest bankruptcy due to the fraudulent accounting of chairman and few directors and negligence of auditors
Objectives Of Corporate Governance It seeks to achieve: • a properly structured board • the board is balanced as regards the representation of adequate number of non-executive and independent directors who will take care of the interests and well being of all the stakeholders; • the board adopts transparent procedures and practices and arrives at decisions on the strength of adequate information. • the board has an effective machinery to subserve the concerns of stakeholders • the board keeps the shareholders informed of relevant developments impacting the company; • the board effectively and regularly monitors the functioning of the management team; and • the board remains in effective control of the affairs of the company at all times.
Major factors driving need for improvement corporate governance • Free market • Globalization • Technology • Population
