Types of Corporate Governance

Corporate governance is a field of complex ethics, policy and practice that involves various stakeholders. It encompasses the systems and structures that guarantee accountability, probity and transparency in company operations and reporting. It covers the way boards oversee the executives of a business, and the selection, monitoring and evaluation of the CEO’s performances. It also covers the manner in which directors make financial decisions and how they communicate https://boardroomdirect.blog/the-most-useful-checklist-for-board-meetings/ those decisions to shareholders.

In the 1990s, corporate governance became a hot topic due to the introduction of structural reforms aimed at establishing markets in former Soviet countries and the Asian Financial Crisis. The 2002 Enron debacle, followed by a wave of shareholder activism from the institutional sector and the 2008 financial crisis, increased scrutiny. Corporate governance is an ongoing topic, with new pressures and innovations constantly emerging.

The Anglo-Saxon or «shareholder first view» places the priority on shareholders. Shareholders elect a Board of directors who oversee management and sets the strategic goals for the company. The board is accountable for identifying and reviewing the CEO, setting and monitoring enterprise risk management policies, directing the operations of the company, and submitting reports to shareholders on their stewardship.

Effective corporate governance is based on four fundamentals such as integrity, transparency fairness and responsibility. Integrity is the manner in the way board members make their decisions. Transparency is the term used to describe openness and honesty as well as the full disclosure of all information to all stakeholders. Fairness refers to how boards treat their employees and suppliers as well as customers. Responsibility is based on how a board treats its own members and the entire community.