Types of Corporate Governance28.09.23
Corporate governance is a area that is a complex area of ethics, policy and practice that is involving numerous stakeholders. It encapsulates the structures and systems that guarantee transparency, accountability and integrity in company operations and reports. It includes the manner in which boards oversee the executive management of a company, and the selection, monitoring and evaluation of the CEO’s performances. It also covers the manner in which directors make financial choices and how they communicate these decisions to shareholders.
Corporate Governance became the subject of intense debate in the 1990s, as a result of structural reforms that helped build markets in former Soviet countries as well as the Asian financial crisis. The 2002 Enron incident, followed by a surge of shareholder activism in the form of institutional shareholders and the 2008 financial crisis heightened scrutiny. Corporate governance is a hot topic today, with new developments and pressures constantly surfacing.
The dominant school of thought, known as the «shareholder supremacy» view or Anglo-Saxon method, places a higher priority on shareholders. Shareholders elect a board directors who oversee management and establishes the strategic goals for the company. The board is responsible for choosing and evaluating the CEO, establishing and evaluating enterprise policies on risk management, supervising the operations of the company and submitting reports to shareholders on their stewardship.
Integrity, transparency, fairness, and accountability are the four core principles of effective corporate governance. Integrity is the method by which board members take decisions. Transparency is the term used to describe transparency, honesty, and full disclosure of all information to all stakeholders. Fairness is the way boards treat their employees, suppliers and customers. Responsibility relates to how the board treats its own members as well as the community at large.