Types of Corporate Governance

Corporate governance is a challenging area of practice, policy and ethics that entails many stakeholders. It encompasses the systems and structures that guarantee transparency, accountability, and probity in the company’s operations and reporting. It also covers the way in which boards oversee the executive management of a business and how they select, monitor and evaluate the performance of the CEO. It also entails the way in which directors make financial decisions and how they communicate these to shareholders.

In the 1990s, corporate governance became a hot topic due the introduction of structural reforms aimed at establishing markets in former Soviet states and the Asian Financial Crisis. The 2002 Enron disaster, which was https://boardroomdirect.blog/real-estate-data-room-and-its-functionality/ followed by a surge of shareholder activism from the institutional sector and the 2008 financial crisis, raised scrutiny. Corporate governance remains an issue of great interest today with new demands and innovations constantly emerging.

The Anglo-Saxon or «shareholder prioritization view» places the priority on shareholders. Shareholders elect the board of directors, which directs management and sets strategic aims for the company. The board is accountable for identifying and reviewing the CEO, setting and monitoring the company’s risk management policies, overseeing the operations of the company, and submitting annual reports to shareholders on their management.

Integrity honesty, transparency, fairness and responsibility are the four core principles of a successful corporate governance. Integrity is a reflection of the ethical and responsible way board members make decisions. Transparency refers to openness, honesty and complete disclosure of important information to all stakeholders. Fairness refers to how boards treat their employees as well as their suppliers and customers. Responsibility is the way a board handles its members and the community at large.