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Need for Corporate Governance

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Added on  2021-06-22

Need for Corporate Governance

   Added on 2021-06-22

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ContentsAbstract...............................................................................................................................................2Introduction.........................................................................................................................................3Need for corporate governance..........................................................................................................3Approaches to corporate governance................................................................................................4Principles of corporate governance....................................................................................................5Fairness..........................................................................................................................................5Accountability..................................................................................................................................5Responsibility..................................................................................................................................6Transparency..................................................................................................................................6Benefits of corporate governance......................................................................................................6Avoid penalties from breaching regulations....................................................................................6Improves employees Morale...........................................................................................................6Improves business opportunities....................................................................................................7Minimise the capital cost.................................................................................................................7It improves decision making of the top management.....................................................................7Helps to generate better strategic planning....................................................................................7Critical Evaluation of different aspects of corporate governance.......................................................7Conclusion..........................................................................................................................................8References.........................................................................................................................................9Figure 1 Principals of corporate governance(Trade brain, 2019) ....................................................4BOD Board of Director1 | P a g e
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Abstract This paper reviews about the details of corporate governance, benefits and contemporarydevelopments to an organisation. Corporate governance provides a well-defined structure for acompany to achieve the objectives distinguished from the day to day operations in regards withthe interests of every stakeholder. It ensures that a business has effective decision-makingprocesses and controls in place which balances individual and societal goals, interests ofstakeholders as well as economic and social goals. Corporate governance ensures thetransparency which helps to safeguard the interests of all stakeholders creating a strong and well-balanced economic development for an organisation. The two approaches to corporate governance are rule based approach and principle-basedapproach. The principle-based approach or the comply or explain is opposite of rule-basedapproach which is based on the view that a specific set of rules is inappropriate for eachorganisation. Further, this report includes the four core principles of corporate governance. That isFairness, accountability, responsibility and transparency. Additionally, an evaluation of differentaspects on corporate governance are being discussed.2 | P a g e
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Introduction Corporate governance is the technique or the approach used by an organisation to administer andoperate a business globally. James Chen [CITATION Jam20 \n \t \l 2057 ], described corporategovernance as a system of rules, practices and processes by which an organisation is directedand controlled. It provides a well-defined structure for a company to achieve the objectivesdistinguished from the day to day operations in regards with the interests of every stakeholder. Itensures that a business has effective decision-making processes and controls in place whichbalances individual and societal goals, interests of stakeholders as well as economic and socialgoals. Corporate governance is conducted by the Board of Directors of a company. Hence, it is aboutwhat the BOD does and how it sets the values aligning with the business conducts and objectives.It outlines the action plans, performance measurement, disclosure practices, executivecompensation decisions, dividend policies, reconciling conflicts of interest procedures and explicitand implicit agreements between the stakeholders and an organisation [ CITATION Jam20 \l 2057]. According to the Organisation for economic co-operation and development [CITATION OEC15 \n \t \l 2057 ], the purpose of corporate governance is “to help to build an environment of trust,transparency and accountability necessary for fostering long term investment, financial stabilityand business integrity thereby supporting longer growth and more inclusive society”. A goodcorporate governance in place ensures financial stability for the company and return on return oninvestment for the stakeholders. Alternatively, a bad governance effects the company reputation,reliability, integrity and financial health [ CITATION Jam20 \l 2057 ]. Need for corporate governanceCorporate governance ensures the transparency which helps to safeguard the interests of allstakeholders creating a strong and well-balanced economic development for an organisation[ CITATION Ant18 \l 2057 ]. It is needed when preparing financial reporting and accountability bythe BOD and management to comply with the ethical standards to mitigate the financial risks. Abad governance policies results in fallout of business losing their integrity and reputation. Companies like Enrol corporation fallout is the perfect example of the result of ineffectivecorporate governance and corrupt practices in the organisation [ CITATION Ant18 \l 2057 ]. Thepoor corporate governance resulted in failing to achieve the stated goals and collapsing of thecompany with significant financial losses for the stakeholders. Therefore, good corporategovernance is needed to create a distinction between the power and influence of the3 | P a g e
Need for Corporate Governance_3

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