CONCEPT OF CORPORATE GOVERNANCE

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Corporate governance is a process that aims to allocate corporate resources in a manner that maximizes value for all stakeholders – shareholders, investors, employees, customers, suppliers, environment and the community at large and holds those at the helms to account by evaluating their decisions on transparency, inclusivity, equity and responsibility. The World Bank defines governance as the exercise of political authority and the use of institutional resources to manage society's problems and affairs.

Corporate governance also is the set of processes, customs, policies, laws, and institutions affecting the way a corporation (or company) is directed, administered or controlled. It also includes the relationships among the many stakeholders involved and the goals for which the corporation is governed. In contemporary business corporations, the main external stakeholder groups are shareholders, debt holders, trade creditors, suppliers, customers and communities affected by the corporation's activities. Internal stakeholders are the board of directors, executives, and other employees.

ADVANTAGES OF CORPORATE GOVERNANCE

Enhanced Performance 

Ø  Helps a company improve overall performance. Without corporate governance, a company tends to be weak and sluggish.

 Access to Capital

Ø  The better corporate governance a company has, the more easily it can access outside capital that the business can use to fund its projects. Since corporate governance includes major shareholders, it connects investors with the business itself, and these investors use their resources and contacts to support the company monetarily.

 Better Standards

Ø  Corporate governance makes many decisions about business operations, but one of the most important decisions involves corporate standards. Standards affect the quality of products and the goals that the business has in technology, customer service, and marketing.

 Better Talent Utilization

Ø  With a strong corporate governance structure, people can find positions that utilize their talents more effectively, and the board of directors and top leaders of the business are always looking to add more talented people to their numbers.

 

DISADVANTAGES OF CORPORATE GOVERNANCE

 Easily Corruptible

Ø  Corporate governance needs a certain level of government oversight to avoid increasing levels of corruption. The lack of governmental oversight in corporate governance lead to a misallocation of credit that actually worked against competition

 Demand for information

Ø  In order to influence the directors, the shareholders must combine with others to form a voting group which can pose a real threat of carrying resolutions or appointing directors at a general meeting.

 Monitoring costs

Ø  To effectively govern a publicly traded corporation, shareholders must speak with one voice and have enough votes to allow that voice to have any real weight. This requires individuals that have a collective vision for the company to pour more money into that company to gain a controlling share.

 Supply of accounting information

Ø  Financial accounts form a crucial link in enabling providers of finance to monitor directors. Imperfections in the financial reporting process will cause imperfections in the effectiveness of corporate governance. This should, ideally, be corrected by the working of the external auditing process.

 

CONCLUSION

The country must have a good reputation for corporate governance practices, investors are confident with the level of exposure, choose quality accounting standards and statements that will constantly flowing source of funds and support the development of Corporate Governance. Every institution, every stakeholder needs to provide input into the agenda of corporate governance. The adoption of governance best practices increases the likelihood that leadership will provide the desired corporate performance.

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