CORPORATE GOVERNANCE

Corporate Governance

Corporate Governance

Corporate Governance

Corporate governance is a system that controls and directs the actions of the organization with a clear intention to develop and sustain strong relationship between the management and directors of the company along with the stakeholders that includes customers, employees, investors as well as shareholders. Moreover, corporate governance also aim to improve the company's performance by developing and maintaining positive and strong image in the industry and market as well as helps the company to increase the profit of the business. However, another thing to notice about corporate governance is that the framework for the European Union member states takes in a combination of regulatory guidelines and legal guidelines along with the laws that include corporate governance code as well as proposals and recommendations for the organization of member states in integrating the best possible code in their actions. In addition to this, recommendations for the company are also to improve the performance with positive intention to improve the business in term of making profit (Borisova et al., 2012, p.2918). One must also put into consideration that European Union puts pressure on the organization to abide by the code of conducts of corporate governance of European Union based on the explain or comply approach.

The concept behind the corporate governance is the set of rules and principles that are governing the operation, integration and design of corporate governance bodies. The body of corporate governance is mainly three powers in the company: Senior Management, Directors and the Share holders. Good corporate governance is considered to be good that offers incentives and benefits to safeguard the interests of shareholders and the company by monitoring the efficient use of all kind of resources and creating value to provide transparent information. The concept of corporate governance came into being decades ago in most of the developed countries of Europe because of the arising need of shareholders of the company to be familiar with the status of their investment, for example, shareholders wanted to know that what the company is doing with their money and what are the future expectations of their investment. This directed towards the shareholders of a company and its directors to initiate a procedure of transparency of information.

The explain or comply approach that is mentioned above is actually a regulatory framework that is utilized in the European Union states members as regard to the incorporation of the corporate governance. In accordance with such approach, it is helpful in setting out a code of conduct where companies that are listed have to either comply with corporate governance practice of European Union or they could do with the explaining why they are not complying with such practices instead of establishing government regulations (Ammann et al., 2013, 455). However, one must also notice that many countries in Europe use approach of comply or explain with the purpose to place a least standard that the companies are obliged to follow with regard as the most sensitive and most crucial ...