What is Good Corporate Governance?

Good corporate governance refers to methods, laws and policies that direct, control and administers important functions of a corporation. Principal stakeholders and board of directors within the corporation are the ones who manage the principal corporation. Good corporate governance ensures the goals of the management stays within the lines of agreement of the stakeholders.

While working toward maximizing shareholders value and fairness, a good corporate governance system ensures their rights are protected at all times. Stakeholders and shareholders alike are driven to improve corporate governance, although some of these changes come from federal mandates. What most stakeholders want is concise information with a clear and feasible link to overall business strategy.

Good corporate governance structure specifies the distribution of rights and responsibilities among different participants in the corporation, such as, the board, managers, shareholders and other stakeholders, and spells out the rules and procedures for making decisions on corporate affairs. By doing this, it also provides the structure through which the company objectives are set, and the means of attaining those objectives and monitoring performance. Good corporate governance is about promoting corporate fairness, transparency and accountability.

Businesses need to be controlled and directed. Because most corporations are pretty large, good corporate governance tells which groups of people are to do what. Board managers, stakeholders, and shareholders each have a say in the rules and procedures of the company. This gives structure to the company and ensures each group is watching the other to keep things in line. This also ensures the company will prosper because each group has to maintain certain strength in order for everything to work like a well oiled machine.