In this article, we will be going to discuss in brief about “What is Corporate Governance?”

Do you know why corporate governance is necessary for companies?

If no, then don’t worry because, in this article, we will be discussing the benefits, scope and definition of corporate governance.

Let’s get started with the Definition,

Definition:

Corporate Governance represents the way a company needs to govern.

It has a combination of Rules, process or laws by which a business is operated, regulated or controlled.

In this term, it includes both the external and internal factor that might affect the interests of the Shareholders of the Company, which also includes customers, suppliers, government regulations and management.

It has a different technique by which the companies give direction and proper management.

Corporate governance is nothing, but it states the carrying of the business according to the shareholder’s desires.

This activity has to organise by the Board of Directors and the concerned committees for the company’s shareholders benefit.

This practice will include the principle of transparency, accountability, and security.

Corporate Governance will help in balancing the individual and social goals as well as the economic and social goals.

With these, they provide the guidelines as to how the company can be controlled or directed in such a way that it fulfils the goals and objectives addressed by the shareholders that will add value to the company and also become beneficial for the shareholders in the long term.

Considering C.Governance, it should be in a manner that consists of a healthy relationship between the owners and managers in a company and there should be no conflict between them.

It also deals with the way of providing finance guarantee to them by receiving a fair return in their investment.

This concept has a broad scope that includes both the social and institutional aspects which belief in encouraging a trust-worthy, moral as well as ethical environment to every element consisting of the Company.

Every Company needs Corporate Governance to move ahead swiftly and with complete transparency with taking care of both the factors.

Let’s move ahead with knowing the Principles of Corporate Governance.

Principles:

-The principles of Corporate Governance are base on, such as conducting the business with all the integrity and fairness, by being transparent concerning transactions.

-By making all the disclosures and decisions, complying with all the laws of the land, accountability and responsibility towards the Shareholders and commitment is to be made in ethically conducting the business.

-All the corporate governance policies and procedures need to be transparent or need to disclose to the shareholders of the company.

-Legal, contractual and social obligations to the non-shareholder stakeholders must be upheld.

-All the shareholders need to treat equally and fairly.

-You need to do all the speaking with relevant data to the representatives, financial specialists, sellers and individuals from the network.

-These are principles highlighted in C.Governance.

-Another added principle highlighted by the SEBI is that the report on c.g. is in need by those individuals who have a control to be able to differentiate between the personal and corporate funds while managing a company.

These all were the principles that one should know under Corporate Governance.

Now we will move ahead by understanding the benefits of corporate governance.

Benefits of Corporate Governance

• With good corporate governance, it ensures the company success and economic growth.

• It helps in lowering the Capital Cost

• This will create a positive impact on the Share Price.

• With good c.governance it helps in brand formation and development in the company.

•It minimises the wastages, risks, corruption and mismanagement in the company.

•When there is excellent and robust c.governance in the company, it increases the investor’s confidence with this, it results in raising the capital efficiently and effectively.

• Creates transparency between the management and shareholders.

•Gives proper information to the owners as well as to the managers to know and to achieve the objectives that should be in the interest of the Shareholders and organisations.

• With the help of good c.governance, it enables the organisation to be managed in a manner that fits best in the interest of all.

These were the benefits of Corporate Governance.

Poor C.governance will lead the company to collapse at the worst with significant losses for the shareholders.

Regulation of Corporate Governance

Corporate Governance has received increased attention due to the increase in high profile scandals involving the abuse of corporate power or alleged criminal activity by the corporate officers.

Therefore, laws and regulations have been passed to label the components of c.governance.

There are three acts for this:

  1. Sarbanes-Oxley Act
  2. Gramm-Leach-Billey Act
  3. Basel II

Conclusion

From this article on, “What is Corporate Governance?” explains in brief about the definition, benefits, principles and regulations.

I hope that this article will help you to understand the briefing and importance of Corporate Governance and the reason why the company consider this activity.

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Author

Prashant Raut is a successful professional stock market trader. He is an expert in understanding and analyzing technical charts. With his 8 years of experience and expertise, he delivers webinars on stock market concepts. He also bags the ‘Golden Book of World Record’ for having the highest number of people attending his webinar on share trading.