Types of Corporate Governance

27 Sep Types of Corporate Governance

Corporate governance is a area of complex ethics, policy and practice that has various stakeholders. It encompasses the systems and structures that guarantee transparency, accountability and probity in the company’s operations and reporting. It also covers the way in which boards oversee the executive management of businesses, and how they select to monitor and evaluate the CEO’s performance. It also includes the way directors make financial choices and how they communicate their decisions to shareholders.

In the 1990s, corporate governance became an issue of great interest due to the implementation of structural reforms to build markets in former Soviet countries and the Asian Financial Crisis. The 2002 Enron scandal, then a wave of shareholder activism by institutional shareholders and the 2008 financial crisis, heightened scrutiny. Corporate governance is still an ongoing topic with new demands and new ideas constantly emerging.

The Anglo-Saxon or «shareholder primary view» places the priority on shareholders. Shareholders elect a board of directors who direct management and sets corporate goals. The board is responsible for https://boardroomdirect.blog/board-governance-software-products-in-2022/ selecting and reviewing the CEO, setting and monitoring enterprise risk management policies, supervising the operations of the company, and submitting annual reports to shareholders on their management.

Effective corporate governance is based on four pillars such as integrity, transparency fairness and responsibility. Integrity is the ethical and responsible manner in which board members make decisions. Transparency is about openness and honesty as well as the complete disclosure of information to all stakeholders. Fairness refers to how boards treat employees, suppliers, and customers. Responsibility is based on how a board behaves towards its own members as well as the community in general.