Corporate governance can basically be considered to be the totality of the organization as regards substance of guidance and supervision understood by businesses.
Corporate governance provides a legal and factual regulatory framework, particularly regarding the involvement of the company in its environment and is different from corporate management, which primarily deals with the running of the company.
Corporate governance is a multifaceted topic, the basic function of corporate governance is ensuring the accountability of some figures in an organization by minimizing or eradicating the source of the problem. Other aspects relating to corporate governance include the stakeholder perspective and the corporate governance models globally.
Setting company rules may be done by the owners, supervisory or administrative management or other stakeholders. Regardless of who does it, they lay down the guidelines, the code, memorandum of understanding. And corporate governance rules can be drawn up as mandatory and binding framework.
Corporate governance can be very complex and covers both compulsory and voluntary measures: the honoring of laws and regulations and to develop and follow own corporate guidelines. Another facet of corporate governance is the design and implementation of management and supervisory structures.
Essentially, it is a concept of structuring, operating and controlling an entity with the intention of accomplishing long term strategic targets that meet shareholders, creditors, customers and others’ legal and regulatory requirements.
Indicator of good corporate governance is operational management, transparency in corporate communications, appropriate handling of risks and management decisions focused on long-term value creation.
Corporate governance is not a uniform set of rules, but a couple of recognized common principles, an entity specific understanding of responsible corporate governance.
The beginning point of the declaration and implementation of corporate governance lies in the 1930s, when it was first recognized due to the divergence of interests of shareholders.
The perceived quality of a company’s corporate governance can determine its stock price, quality is dictated by the financial markets, legislation and other market forces in addition to how policies and processes are executed.
Corporate governance in family firms differs from that of other companies, the governance of family businesses is called family business governance. It is characterized by the identity of management and ownership, and independence from the capital markets.
The issue of good and transparent corporate governance takes more importance in the social economy, particularly for institutions in the social sector.
In some countries corporate governance principles are laid in a national corporate governance code has been fixed, the code will assists in making transparent the rules applicable for the monitoring of national and international investors. Thus strengthening confidence in the management of companies.