Good corporate governance refers to methods, laws, and policies that direct, control, and administer important functions of a corporation. Principal stakeholders and board of directors within the corporation are the ones who manage the principal corporation. Good corporate governance ensures the goals of the management stays within the lines of agreement of the stakeholders. Most people think there is no difference between stakeholders and shareholders in a corporation; however, there is a difference, and that is why it’s important to manage things correctly. While working toward maximizing shareholders’ value and fairness, good corporate governance system ensures their rights are protected. Since Enron and WorldCom were such failures for big business, corporate governance has reinforced its protection considerably. Stakeholders and shareholders alike are driven to improve corporate governance, although some of these changes come from federal mandates. What most stakeholders want is concise information with a clear and feasible link to overall business strategy.
Corporate efficiency is shaped by good corporate governance and strengthens employment stability, retirement security, and the endowments of orphanages, hospitals, and universities. Good corporate governance structure specifies the distribution of rights and responsibilities among different participants in the corporation, such as, the board, managers, shareholders, and other stakeholders, and spells out the rules and procedures for making decisions on corporate affairs. By doing this, it also provides the structure through which the company objectives are set, and the means of attaining those objectives and monitoring performance. Good corporate governance is about promoting corporate fairness, transparency, and accountability.
Because there seems to be so many definitions of what makes good corporate governance, it is important to choose one definition. Businesses need to be controlled and directed. For most large corporations, good corporate governance tells which groups of people are to do what. Board managers, stakeholders, and shareholders each have a say in the rules and procedures of the company. This gives structure to the company and ensures each group is watching the other to keep things in line and keeps everybody honest. This also ensures the company will prosper because each group must maintain certain strength in order for everything to work like a well-oiled machine. If one group goes down, the other groups help restore it back to running the way it’s suppose to. If one group fails, then eventually all groups fail and then nobody prospers.
