Corporate Governance– What is the role of a CFOAbstractCorporate Governance, as defined by the International Finance Corporation, is “the structuresand processes by which companies are directed and controlled.
Theories of Corporate GovernanceAgency Theory.Stewardship Theory.Resource Dependency Theory.Stakeholder Theory.Transaction Cost Theory.Political Theory.
Corporate governance entails the areas of environmental awareness, ethical behavior, corporate strategy, compensation, and risk management. The basic principles of corporate governance are accountability, transparency, fairness, and responsibility.
Integrity and ethical behavior: Integrity should be a fundamental requirement in choosing corporate officers and board members. Organizations should develop a code of conduct for their directors and executives that promotes ethical and responsible decision making.
Theories of corporate governance are rooted in agency theory with the theory of moral hazard implications, developing further within stewardship theory and stakeholder theory and evolving at resource dependence theory, transaction cost theory and political theory.
To date, researchers have identified three models of corporate governance in developed capital markets. These are the Anglo-US model, the Japanese model, and the German model.
“Corporate governance means that company manages its business in manner that is. accountable and responsible to the shareholders.
1970s“Corporate governance” first came into vogue in the 1970s in the United States. Within 25 years corporate governance had become the subject of debate worldwide by academics, regulators, executives and investors.
What is meant by the term 'corporate governance'? The selection and conduct of the senior officers of the organisation and their relationships with the owners, employees and others who have an interest in the organisation.
A company which applies the core principles of good corporate governance; fairness, accountability, responsibility and transparency, will usually outperform other companies and will be able to attract investors, whose support can help to finance further growth.
10 Principles of corporate governanceLay solid foundations for management and oversight. ... Structure the Board to add value. ... Promote ethical and responsible decision-making. ... Safeguard integrity in financial reporting. ... Make timely and balanced disclosure. ... Respect the rights of shareholders. ... Recognise and manage risk.More items...•
Corporate governance refers to the set of mechanisms and processes that help ensure that companies are directed and managed to createvalue for their owners, while concurrently fulfilling responsibilities to other stakeholders.