EFFECT OF GOOD CORPORATE GOVERNANCE
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EFFECT OF GOOD CORPORATE GOVERNANCE
Chapter one
INTRODUCTION
Corporate governance is the system that directs and controls companies. Statutory supervision over corporate governance has existed for a long time and has grown in importance.
Corporate governance is the process by which businesses are directed and managed in the best interests of its owners and investors. It relates to the responsibilities of the board of directors, executives, and non-executives. Shareholder rights and activities made by shareholders to influence company decisions.
Corporate governance encompasses all of the general procedures that encourage management to operate in the best interests of the company’s shareholders.
According to Piplock (2004), “Corporate governance is the set of rules and practices that govern the relationship between corporations’ managers and shareholders, as well as other stakeholders such as employee creditors, tax authorities, trade unions, suppliers, and other public authorities.”
THE ESSENCE OF GOOD CORPORATE GOVERNANCE.
1. Corporate governance seeks to foster a culture in which directors give privacy to the ethical pursuit of shareholders’ best interests.
2. Corporate governance allows for the evaluation of audit regulations, a corporate disclosure framework, and shareholder participation to increase company responsibility and transparency.
3. It ensures that the audit committee assists the board of directors in overseeing the integrity of the company’s financial statements, compliance with legal and regulatory requirements, and the performance of the company’s internal audit function.
4. It makes organisations more reputable, both domestically and internationally, and ensures a management system that promotes creative and progressive entrepreneurship.
5. Corporate governance contributes to the maximisation of corporate value by increasing the corporation’s transparency and efficiency for the future.
6. Corporate governance’s job is to prevent managers from expropriating investors.
7. Good corporate governance would prevent theft and fraud by implementing methods developed by the board and management.
8. Corporate governance is concerned with how financial institutions ensure that their investments yield a return.
Strategic Management in Corporate Governance.
Adeleke, Ogundele, and Oyenuga (2004) define strategic management as the process of developing and implementing strategic decisions or corporate decisions, as well as the process of strategic change.
Bowman and Asch (1987) define it as the match between an organization’s own resources and the challenges, risks, and opportunities caused by the external environment in which it operates.
Strategy can be defined as the key link between what an organisation wants to achieve, the policies that guide its operations, and the plans for reaching those goals, which are articulated in such a way that they define the business in which the organisation is or will be engaged.
The significance of strategic management within the framework of corporate governance is:
(1) The concept of strategy is supposed to apply to the entire organisation.
(2) It focuses on an organization’s long-term direction.
(3) It differs from operational matters, which deal with the day-to-day aspects of running a business.
(4) Strategic management abilities are regarded as superior and are frequently expected to be found at the highest levels of a business.
The following concerns are considered when making strategic decisions.
2. The scope of the organization’s activity, such as which markets to service and in what areas.
3. How an enterprise responds to its external environment.
4. An organization’s long-term direction, as opposed to day-to-day concerns.
5. Matching the organisation’s operations to its resource capabilities.
The Principles of Corporate Governance
The following could serve as basic corporate governance concepts to be implemented.
1. Create a robust framework for management and monitoring.
2. Design the board to provide value.
3. Encourage ethnic-based and responsible decision-making.
4. Maintaining the integrity of financial reporting.
5. Providing continuous, timely, and balanced disclosure to the Stock Exchange.
6. Respect the rights of shareholders.
7. Recognise and handle risks.
8. Encourage improved performance evaluations.
9. Pay fairly and responsibly.
10. Recognise the legitimate interests of stakeholders.
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