Types of Corporate Governance

Corporate governance is an area that is a complex area of ethics, policy and practice that has numerous stakeholders. It covers the systems and structures which guarantee transparency, accountability and transparency in the company’s operations and reports. It encompasses the method by which boards supervise the executive management of businesses and how they choose the CEO, monitor and assess the performance of the CEO. It also includes how directors make financial decisions and how they communicate these to shareholders.

In the 1990s, corporate governance became a hot topic due to the implementation of structural reforms to build markets in former Soviet states and the Asian Financial Crisis. The Enron scandal of 2002, followed by the activism of institutional shareholders, and the 2008 financial crisis has led to increased scrutiny. Corporate governance remains an ongoing topic with new pressures and innovations constantly emerging.

The Anglo-Saxon or “shareholder prioritization view” puts the emphasis on shareholders. Shareholders elect a board directors who direct management and sets the strategic goals for the company. The board is responsible to select and assess the CEO, establish and monitor enterprise policies on risk management and oversee the operations of the business. They also present reports on their management to shareholders.

Effective corporate governance focuses on four pillars that are integrity, transparency, accountability and fairness. Integrity is the manner in the board members make decisions. Transparency means openness and honesty, as well as full disclosure of all information to all stakeholders. Fairness is the way boards treat their employees, suppliers and customers. Responsibility is how a board behaves towards its own members as well as the community at large.

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