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| Photo by fanjianhua |
What is Corporate Governance?
Corporate governance is frequently defined as the system by which the board of directors and management of a business direct and control its operations. However, what does this truly imply?
Corporate Governance, in reality, is a collection of sound business practices embedded in a company's mechanisms, processes, directives, policies, practices, structures, and relationships, all of which are used by management and the Board of Directors to control and operate the business.
It is critical to remember that each practice is a component of the overall corporate governance system and cannot be performed independently. Even if a business has an ethical code, operating policies, or a manual, its corporate governance system will be ineffective unless it has an internal audit function to ensure compliance. Another example is a company that may have established appropriate Board Committees, but lacks a committee charter or clearly defines committee duties and responsibilities. As a result, the organization's corporate governance may be deficient. And thus is the importance of a good Corporate Governance.