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Assessing Corporate Governance in the Real World - Essay Example

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Assessing Corporate Governance in the Real World

Corporate governance refers to the structure which ensures that the right questions are asked and checks and balances are in place to make sure that the answers to these questions reflect what is in the best interest of the organization for long-term sustainability of value (Minow & Monks, 2008).
According to Davis (2006) corporate governance can be viewed as a system for optimizing the contributions of a number of stakeholders to a purpose they are persuaded to share. These stakeholders involve shareholders; the board of directors, customers, employees, suppliers, community and the government.
Effective corporate governance has a profound effect on how well a business performs. Organizations which have found effective means of governing their businesses are prosperous and remain prosperous. The board's inability to establish a sound governance model gives rise to the probability of failure of the enterprise (Colley et. al, 2004). The purpose of corporate governance is to ensure the survival and success of the organization (Davis, 2006).
Good corporate governance requires a complex system of strict checks and balances. The three key actors in corporate governance are the management, directors and the shareholders. (Minow & Monks, 2008)
Appropriate implementation of the business concept with goals...
Effective board of directors that carries out responsibilities with integrity and competency
A competent CEO hired by the board to run the business
The CEO's selection of a good business in an industry in which the firm can compete effectively and profitably, with the board's consent
The creation of a valid business concept by the CEO and management with consent of the board.
Appropriate implementation of the business concept with goals and directions set by the board, resource planning and effective execution of plans carried out by CEO and the alignment of board and management objectives with those of shareholders.
A system to ensure that the obligations to stakeholders are met with integrity and under compliance with the laws and regulations.
Full and timely disclosure of the business performance to the investment community
In the book Best Practices in Corporate Governance (2006), the author highlights eight core dimensions of corporate governance. These include;
Identity of the organization which requires the organization to be clearly defined.
Purpose which clarifies what the company aims to do and gives the organization a sense of direction.
Leadership as a driving force behind corporate governance maintains focus on the purpose and enables those involved in working to achieve it.
Distributing power in corporate governance refers to the sharing of power, accounting for its use and avoiding its abuse.
Inclusiveness and communication is significant to corporate governance because it is the basis of trust building, it is the involvement of stakeholders and openness and transparency with them.
The pattern of accountability required
Maximizing effectiveness for the achievement of an agreed purpose.
Ensuring sustainability ...Show more

Summary

Davis (2006) cites the definition of corporate governance provided by the Cadbury Committee Report of December 1992 stating that corporate governance is the 'system by which companies are directed and controlled. Boards of directors are responsible for the governance of their companies…
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Assessing Corporate Governance in the Real World essay example
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