Corporate Governance and its Importance in Business

Part 1
Introduction: there are a lot of different stakeholders involved in a corporation including
investors, customers, employees, society and the government. The result is that the corporation is
required to remain just and clear towards its stakeholders in all the dealings in which it is
involved. As a result of globalization, the economy has opened up and the corporate world also
needs first-class governance arrangement. The core of business world is present in the promotion
of the compliance of law in letter and spirit, with accountability and transparency, and at the
same time, fulfilling all the fair demands of different participants. Except if the company holds
and reveals ethical behavior, the conflict will not be in a position to flourish. Therefore,
corporate governance is the tool that can be used for achieving this objective. In case of
corporate governance, there is a blend of solid pledge on the part of the administration of the
corporation for safeguarding the interests of different stakeholders, bringing fresh air for
enterprise and corporate ethics (Adam, Mukhtaruddin, Soraya and Yusrianti, 2015).
Student 1: Consequently, corporate governance provides the general parameters related with
liability, control and reporting system adopted by the administration. It includes the collaborating
association that exists between numerous components for the purpose of deciding the direction
of the company and its performance. However, this fact cannot be disputed that corporate
scandals and scandals are resulting in discouragement in our lives. Consequently, among the
most urgent tasks of the present times is to comprehend the implications related with corporate
dilapidation and failure that is seen these days. The challenges and issues that are present before
the corporate world have never been so unpredictable and turbulent. At the same time, it also

needs to be mentioned that the appropriate governance of corporations is very crucial for the
global economy, as is the appropriate governance of nations (Azim, 2009).
In this context, corporate governance is related with a set of systems, as well as processes and
values that use for governing a corporation. It has been stated that the objective of corporate
governance is business according to the desires of the owner/shareholders. Generally this desire
is to make as much money as possible and at the same time following the basic rules of the
society that are reflected by local customs and law. Under these circumstances, the Board has the
duty of ensuring good governance. This includes the set of relationships that exist among the
management of the corporation, its board of directors, its shareholders and other stakeholders
were relevant in this regard. It is required by good corporate governance that the board should
provide the company with enterprise and integrity. Therefore the board is responsible to the
owners of the company (shareholders) or fulfilling the goals of the company, but its conduct
regarding factors like business ethics could have an effect on legitimate social interests and in
this way, affect the reputation as well as the long-standing welfare of the corporation (Baxter,
2014).
Corporate governance can be described as the association that a corporation has with its
stockholders. It can be broadly described as the relationship with the society. He says it is
possible that relationship of a corporation into society may be distorted by the discrepancy that
exists between corporate social responsibility and governance. It is worth mentioning in this
context that corporate governance is not merely legal compliance, but it requires that the balance
should be maintained between economic and social goals, as well as among separate and
communal goals. In this regard, governance is related with promoting transparency, fairness and

accountability in the corporations (Hill, 1997). It is also related with working ethically and
balance between the social and economic goals. It also incorporates the ability of operating
profitably and at the same time adhering to the relevant rules and regulations and legislations.
The focus in case of conventional analysis of corporate governance was on relocating power and
duty to the Board, administration and the stockholders. Shareholders were considered as the only
remaining claimants regarding assets of the corporation. As per this perspective, the board was
going to act as an agent of the shareholders and the responsibility regarding daily operations lies
with the management. However in present's business world, the board and management of the
corporation acted as the trustees (Kumar and Zattoni, 2015).
Student 2: The need for corporate governance: During the recent years significant concern has
been expressed across the world regarding the standards of governance. In this regard,
corporation law provides that the responsibility of the directors that it should take action in the
best interests of the stockholders. However there are several examples than the directors were
found to be in breach of this duty. A number of cases took place related with unwarranted debt
financing, spiked with fraud, disproportionate increase in the made to the executives that are not
very transparent (Qian, 2013). Under these circumstances, it can be stated that corporate
governance remain significant into the reasons mentioned below:
Corporate governance provides the framework for the creation of long-term trust between the
corporations and the external capital providers.
Corporate governance improves strategic thinking by the top-level management as independent
directors are inducted who bring with them, vast experiences and new ideas.

It also justifies the administration and the observing of risk that are faced by the corporations
across the world.
It limits the responsibility of top management and directors, as the decision-making process is
carefully articulated.
Corporate governance has longstanding reputational effects on major participants, both internally
like the employees and outwardly like the clients, society and political agents.
Elements of good corporate governance:
Powers of the Board
There is no doubt that good governance really is the personal beliefs and values that in turn result
in the values and beliefs of the organization and acts of the board. A major obligation of good
governance is that the authorities, roles and tasks and the liability of the board, its chairman and
CEO should be clearly identified (Raelin and Bondy, 2013).
Legislation
Unambiguous regulations and legislation are required for effective corporate governance.
Therefore, legislation under which there is a need for continuing legal interpretation or in cases
where the legislation is hard to understand on a daily basis, can be subjected considered
manipulation or there can be unintentional misinterpretation.
Management environment
Among the management environment, there is the establishment of clear purposes and
appropriate ethical framework. Similarly there is a need for establishing new processes, which
provides and transparent pronunciation of the accountability, and at the same time implement
sound business planning and encourage businesses to evaluation. So that the right people and
right skills are available for the jobs. It should also establish clear boundaries regarding the