Corporate Governance Introduction Quiz

Governance

• Governance refers to the process of decision-making and implementation of those decisions through the exercise of power or authority by leaders.
• It involves the wielding of power, authority, and influence to enact policies and decisions concerning public life and social upliftment.

Characteristics of Good Governance

• Participation: active involvement of both men and women in decision-making, either directly or through legitimate institutions or representatives.
• Rule of Law: fair legal frameworks enforced impartially, with full protection of human rights, particularly those of minorities.
• Transparency: decisions and their enforcement are made in a manner that follows rules and regulations, with freely available information.
• Responsiveness: institutions and processes serve the needs of all stakeholders within a reasonable timeframe.
• Consensus-oriented: mediation of different interests to reach a broad consensus on what is in the best interest of the whole community.
• Equity and Inclusiveness: ensuring all members feel they have a stake in the society and are not excluded.
• Effectiveness and Efficiency: processes and institutions produce results that meet societal needs while making the best use of resources.
• Accountability: governmental institutions, private sector, and civil society organizations must be accountable to the public and stakeholders.

Corporate Governance

• Defined as the system of rules, practices, and processes that direct and control business corporations.
• Involves balancing the interests of a company's stakeholders, including shareholders, management, customers, suppliers, financiers, government, and the community.
• Purpose: to facilitate effective, entrepreneurial, and prudent management that can deliver long-term success of the company.

Objectives of Corporate Governance

• Fair and equitable treatment of shareholders.
• Self-assessment: enabling firms to assess their behavior and actions before regulatory scrutiny.
• Increase shareholders' wealth: protecting long-term interests of shareholders.
• Transparency and full disclosure: ensuring a higher degree of transparency in an organization.

Basic Principles of Effective Corporate Governance

• Transparency and full disclosure:
  • Meeting the information needs of investment communities.
  • Safeguarding integrity in financial reporting.
• Accountability:
  • Clarifying the board's role and that of management.
  • Promoting objective, ethical, and responsible decision making.
• Corporate control:
  • Building long-term sustainable growth in shareholder value.
  • Creating an environment that promotes performance and accountability.