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 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.
The board undertakes a huge fiduciary responsibility when it assumes the obligation to represent interests of owners, who do not represent themselves. In the course of this representation they are required to demonstrate integrity as well as the competence to make sound decisions (Colley et. al, 2004).
Although the essence of corporate governance has been