Corporate Governance Organization Law Information 2022

Running head: ORGANIZATION LAW 1
Organization Law
Name
Institution

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CORPORATE GOVERNANCE
Corporate governance is a set of rules and practices through which the board of directors of a
particular company ensures that its relationship with shareholders, employees, community and
the government is fair, accountable and transparent. It enables a company to achieve its goals,
control risks and ensure there is compliance. It usually determines how a company is governed
and directly affects how it is managed. Corporate governance is necessary to ensure that the
individual, societal, economic and social goals of the company are balanced. It focuses on the
relationship between the board and the company’s shareholders, as well as the internal controls
and processes happening in the company.
A healthy relationship between the owners and managers in a company is important to ensure
that its performance is according to standard. The roles of the owner and managers should be
clearly defined. Corporate governance gives a guideline on how these interactions should be
done and thus should not be ignored. It works to make a business better through abiding to rules.
Through use of corporate governance, strategic decisions can be made more effective. The
highest authority is usually given to the board of directors. Corporate governance is usually
urged by significant factors such as efficacy and globalization. It ensures that there is
transparency, which eventually leads to economic development that is balanced. It also ensures
that the shareholders rights are being exercised while the company recognizes theirs fully. At the
same time it encourages moral, ethical and a trustworthy environment.
GENERAL PRINCIPLES OF CORPORATE GOVERNANCE
 Shareholder recognition which is important in maintaining the stock price of a company.
 Stakeholder interests which help improve the relationship between the company, press
and community.

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 Clearly outlining the responsibilities of the board to stakeholders.
 Upholding ethical behavior
 Ensuring transparency in all business dealings.
BENEFITS OF CORPORATE GOVERNANCE
 When done properly, good corporate governance leads to economic growth and corporate
success.
 The investors’ confidence in the company is maintained, thus the capital of the company
can be raised effectively.
 The cost of capital is lowered while the share price is impacted positively.
 Objectives that are of interest to the company and shareholders become more achievable
 Risks that might have a negative impact on the company and shareholders are
significantly reduced. Mismanagement, wastage and corruption are also eliminated.
 It helps the company to develop and in brand formation.
 The interests of the organization and shareholders are managed in a way that benefits
both parties.
 Proper governance improves a company’s ability to get external funding hence enables it
to grow. This is an important aspect especially for small businesses.
AUSTRALIAN SECURITIES EXCHANGE
The Australian securities exchange (ASX) is the primary security exchange in Australia. It is
in charge of overseeing compliance of its operating rules and promoting corporate governance in
its listed companies. It also helps educate retail investors.

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The Australian Securities Exchange has come up with approaches to ensure that the entities
listed under it achieve good outcomes and meet reasonable expectations of most investors in
most situations. These approaches are summarized under eight central principles.
Since different entities adopt different governance structures, the principles are not
mandatory.
AUSTRALIAN SECURITIES EXCHANGE CORPORATE GOVERNANCE
PRINCIPLES
1. Structuring the board so that it is effective and adds value. The board should be
structured so that it is of an appropriate size, with members that have the commitment,
knowledge and skills to operate the industry so that its duties are discharged effectively and
value is added to the company.
The board of an entity is responsible for providing leadership, setting up the objectives of the
entity, appointing the CEO and replacing him if necessary, approval of budgets and major capital
expenditure and monitoring how effective the governance practices of an entity are, among other
responsibilities.
2. Responsibility, being ethical and acting lawful should be a culture instilled within
the entities. The listed entity needs to articulate its values and ensure that any breaches in set
codes are made known to the committee or board of governors.
The entity should have a code of conduct for the directors, employees and senior executives,
and ensure that the board of directors is informed in case there is a breach of that code.
3. A solid foundation for management and oversight should be laid. The boards of
governors and management have assigned roles and responsibilities that are used to review their
performance.