Corporate Governance

CORPORATE GOVERNANCE? Ø Corporate governance - set of processes, policies, customs, laws and institutions. Ø Includes the relationships among the many stakeholders involved. Ø The principal stakeholders are the shareholders/members, management, and the board of directors. Other stakeholders include labor (employees), customers, creditors (e.g., banks, bond holders), suppliers, regulators, and the community at large.

Importance… Ø To ensure the accountability of certain individuals in an organization through mechanisms that try to reduce or eliminate the principal-agent problem. Ø Corporate governance system helps in time of economic efficiency. Ø The positive effect of corporate governance on different stakeholders is a strengthened economy ultimately.