Corporate Governance

Corporate Governance

Introduction

The usual definition of governance is 'the manner of directing and controlling the actions and affairs of an entity'. 'Governance' stems from the word 'gubernare', being the Latin word for 'steer' (Shleifer & Vishny, 1997, pp 737 - 783). Government is the modern word for directing and controlling the affairs of a state and has taken on the meaning of the system of governing a state.

All entities including schools, charities, clubs, sporting bodies, state-owned enterprises or business corporations need to be governed (Rezaee, Olibe & Minmier, 2003, pp 530 - 537). The governance of a company carrying on a business is known as 'corporate governance'. Whatever the entity, however, the principles of quality governance apply equally to all of them. As a result of corporate scandals and the realisation of the importance of a company in modern life, the articulation of how to govern companies began in earnest in the last two decades of the 20th century (Clarke, 2004, pp 298 - 305). Since this articulation, the phrase 'corporate governance' has been loosely used when referring to the governance of any entity (Zaman, 2001, pp 45).

Discussion

Corporate Governance

Corporate governance refers to shaping the relationship among stakeholders and directors of companies and corporations, as well as to steering organizations in general (in terms of standardization of processes, guidelines, and policies). Responsibility, accountability, performance orientation, and efficiency are key issues in corporate governance. Corporate governance is the framework that promotes effective stewardship of assets and the sound management of resources (Shleifer & Vishny, 1997, pp 737 - 783). It includes organizational structures, policies, ethical values, planning, objective setting, monitoring and reporting (Clarke, 2004, pp 298 - 305). In probation areas, the probation board is accountable to the Home Secretary for the provision of services, and the chief officer, a member of the board, is the government's 'accounting officer', responsible for the management, operations and finances of the department (Rezaee, Olibe & Minmier, 2003, pp 530 - 537).

One of the fundamental pillars that ensure good corporate governance is the role of control exercised by the Audit Committee composed of Board members who rely on the actions they take both the External Auditor and the Internal Auditor (Zaman, 2001, pp 45). The first appointed by the shareholders at the General Assembly and the latter appointed by the Board. The effectiveness of corporate governance is evident in the tone that gives it high toward his management style, the way they tolerate and manage the risk appetite, risk culture that demonstrate the Directors in the exercise of their functions, all this affects the way it manages corporate risk and internal control and so the evaluation of corporate governance is a systemic and not as a separate item (Venkatraman, Loh & Koh, 1994, pp. 496-507).

Audit Committee

The Audit Committee oversees the financial reporting process of the company, the integrity of its financial statements, the system of internal controls Baxter, the processes of internal and external audit and monitoring processes for compliance with laws and regulations (Rezaee, ...