Good Corporate Governance

Good Corporate Governance

Introduction

In the modern corporate world, the business environment has become increasingly competitive. The consumers now live in an age of absolute control, where they are empowered to choose from a variety of products, and concepts such as loyalty are now a thing of the past. In this volatile environment, the businesses have had to make drastic changes to their structures and strategies to survive in the competition. These companies have to adopt strategies that will maximize their profits, and enable them to survive. In an environment which is predominantly financially oriented, the task of governing these entities becomes difficult. The fact is that all the actions taken by a business are not just limited to the personal interest of that organization alone; these actions have an impact on the respective society that they are a part of, and the environment. How the corporations seek to manage the ownership and control of the company, the organizational objectives, the rights of the various stakeholders, the recognized responsibilities and how they distribute the accumulated value; has become a significant factor not only for the direct stake holders and senior management, but also the wider communities. These are concerns that were raised with the advent of the industrial revolution in the Western Europe, but due to the evolution of the global business environment; these factors have become the cornerstone of the modern business fraternity (Berghe & Ridder, 1999). As the business environment has transcended beyond the national scale; upon the global arena, the adverse consequences of the economic and social factors caused due to the negative corporate governance are exponentially intensified. Due to the size of the giant multinational company, impacts of one organization can be transmitted to numerous other businesses which may be affiliated with it; hence causing a global phenomenon. Due to the potential threat caused by the bad governance of corporations the businesses around the world have adopted the good corporate governance strategies.

Corporate governance is not just a strategy for the management to follow, rather it is a comprehensive set of factors such as legal, cultural, and institutional policies that give a strategic direction to the organization, and how the benefits and risks from the organizational activities are to be allocated. The diversified nature of the components of good corporate governance had ensured that the responsibility of this activity is shared among several stakeholders. As the implications of the organizational activities are not limited to only the immediate or direct stake holders of the company, hence responsibility of implementing good corporate governance strategies are also not limited to these stakeholders. The fact is that the responsibility of implementing good corporate governance falls on various players such as the Board of Directors, Creditors, Rating Agencies, Security Analysts and the shareholders. All of these stakeholders have to follow certain ethical guidelines to ensure that the corporation functions in a sustainable and productive fashion (Lazonick, 2002). The monetary and financials gains cannot be the sole objective of the company, as ...