By Salim Mhanna
March,28, 2013
Definition of 'Corporate Governance'
Corporate Governance is the framework of rules and practices by which a board of
directors ensures accountability, fairness, and transparency in a company's
relationship with its all stakeholders (financiers, customers, management,
employees, government, and the community).
The corporate governance framework consists of:
1) explicit and implicit contracts between the company and
the stakeholders for distribution of responsibilities, rights, and rewards.
2) procedures for reconciling the sometimes conflicting
interests of stakeholders in accordance with their duties, privileges, and
roles, and
3) procedures for proper supervision, control, and
information-flows to serve as a system of checks-and-balances, also called
corporation governance.
In another definition, it is the system of rules, practices
and processes by which a company is directed and controlled. Corporate
governance essentially involves balancing the interests of the many
stakeholders in a company - these include its shareholders, management,
customers, suppliers, financiers, government and the community.
Since corporate governance also provides the framework for
attaining a company's objectives, it encompasses practically every sphere of
management, from action plans and internal controls to performance measurement
and corporate disclosure.
