The basic principles of corporate governance are accountability, transparency, fairness and accountability. There are 5 key principles that form the core of governance under the Code. Companies striving to achieve “best practices” should consider them all. At the heart of good corporate governance is the organization's board of directors, whether it is a for-profit or non-profit company.
The basic principles of corporate governance involve how the board should develop, take action and be held accountable. Establish clear accountability at the top levels of an organization. However, a danger may be that boards get too involved in day-to-day problems and fail to delegate responsibility to management. Four principles are the basis of good corporate governance.
Accountability, transparency, fairness and accountability affect the decisions that board members make. Each principle requires the right data and the right level of interaction to be effective. The company also had a corporate environment that had dishonest people at the top (Fastow) to its merchants who made illegal movements in the markets. Corporate governance also provides the structure through which the company's objectives are established and the means to achieve those objectives and monitor performance are determined.
Good corporate governance creates a transparent set of rules and controls in which shareholders, directors and officers have aligned incentives. Board members with the right tools for corporate communication and monitoring have a profound impact on their organizations. Governance refers specifically to the set of rules, controls, policies and resolutions established to dictate corporate behavior. Good corporate governance has always been about organizations achieving the best possible results, but the vision for those results has changed since they were first articulated by the Cadbury Commission in the United Kingdom in 1991. Corporate governance essentially involves balancing the interests of a company's many stakeholders, such as shareholders, senior managers, customers, suppliers, financiers, government, and the community.
Poor corporate governance can call into question a company's reliability, integrity, or obligation to shareholders; all of which can have implications for the company's financial health. The board is tasked with making important decisions, such as appointments of corporate officers, executive compensation, and dividend policy. Taken together, the set of corporate governance rules and practices, therefore, provides a framework that helps close the gap between household savings and investment in the real economy. The board of directors must ensure that the company's corporate governance policies incorporate corporate strategy, risk management, accountability, transparency and ethical business practices.
During the 1990s in the United Kingdom, three separate committees were created to consider aspects of corporate governance, each of which produced a report. When good corporate governance is abandoned, a company risks collapse and shareholders can suffer substantially. As a result, corporate governance helps promote financial viability by creating a long-term investment opportunity for market participants. With the goal of increasing the available talent pool by 25% and even increasing sales by up to 20%, social responsibility and transparency are now firmly entrenched in the corporate landscape.
