Welcome to Corporate Governance Module Details − Corporate Governance 5fnce002C

Defining Corporate Governance

Defining Corporate Governance

“Corporate governance is a system by which companies are directed and controlled. Board of directors are responsible for the governance of their companies. The shareholder’ role in governance is to appoint the directors and the auditors and to satisfy themselves that an appropriate governance structure is in place. The responsibilities of the board include setting the company’s strategic aims, providing leadership to put them into effect, supervising the management of the business and reporting to shareholders on their stewardship. The board’s actions are subject to laws, regulations and the shareholders in general meeting.” The Cadbury Commission (1992)

Governance
the strategic task of setting the organization's goals, direction, limitations and accountability frameworks
Management
the allocation of resources and overseeing the
day-to-day operations of the organization

Consequences of poor Corporate Governance

Consequences of poor Corporate Governance

Watch the video case study: https://www.youtube.com/watch?v=zZsyBfaG1kU
Aspects of poor corporate governance include:

• a board of directors that fails to perform its duties properly, perhaps because it is dominated by one or more individuals, or because it fails to carry out the tasks that it is supposed to;
• Misleading financial reporting to shareholders and other investors, and perhaps inadequate auditing of the financial statements;
• A poor relationship between the board and the main shareholders;
• Ineffective systems of risk management, and exposure to errors and fraud due to inadequate internal control systems;
• Inappropriate remuneration and reward systems for directors and senior executives;
• Unethical business practices

Stakeholders and their interests