Corporate governance refers to the issues associated with the way corporations
are structured, managed and operated. The use of the term “corporate governance
”, the evolution of the concept and what it entails has started in the early 1980’s.
Among the first was the Cadbury Committee. They defined the purpose of corporate governance in 1992 namely, as a set of processes, customs and policies that frame the business of the company and help manage the subsidiaries. This is then operationalized in a uniform method through administered or controlled directives.
The most quoted and referred to document in this field is the OECD
principles corporate governance. OECD defines it as a set of relationships between a company’s management, its board, its shareholders, and other stakeholders. Corporate governance also provides the structure through which the objectives of the company are set. The means of attaining those objectives and performance monitoring are determined. So, the main recommended principles are stated as rights and equitable treatment of shareholders, interests of other stakeholders, role and responsibilities of the board, integrity and ethical behavior, disclosure and transparency.
Good corporate governance has to establish a culture based on a foundation of sound business ethics in order to fulfill the long-term strategic goal of the owners. It should, particularly, consider and care for the interests of employees, past, present and future and take account of the needs of the environment and the local community. It covers NGOs
, Central and Local Government organizations
even non listed companies with a single shareholder.
|USA vs. China – Culture differences
Corporate governance is then a continual process of changes in a company and not a onetime action. This process consequently changes the corporate culture. Corporate governance may also be described as accountability of people in the business or entity. It is led by people (leaders) that have vision and their goals are driven by a need to make a difference. As these leaders see things others do not even perceive, they get things right more often than they get them wrong.