Corporate Governance is one of the key elements of operating in the right manner, especially with the emergence of global conglomerates. It is the need of the hour with complex structures, globalisation and mammoth organizational sizes making it tougher than ever to regulate externally. 

Companies that fail to regulate themselves and operate in a fair and transparent manner end up perishing with time. 

Theoretically, corporate governance is a set of rules, practices and processes that exist to regulate and operate a company. They are systematically performed to ensure that the desired equilibrium is attained between fulfilling the obligations towards all the stakeholders including, but not limited to shareholders, financiers, auditors, vendors, customers, employees, government and the general public/ community.

It encompasses every possible function at every level from A-Z such as fiscal responsibilities, risk forecast and management, consumer satisfaction, environmental awareness and duties, ethical goals, legal aspects and the greater good of the community. Achieving all these duties and responsibilities involves employees at every level from lower levels to the Board of Directors.

Corporate Governance Framework

In fact, it is the members sitting on the Board of Directors that are entrusted with planning and executing corporate governance to the best of their abilities. This enables the company to operate within the basic framework of corporate governance which primarily has 4 elements:

1) Accountability
2) Fairness
3) Responsibility
4) Transparency

All these rules can only be diligently followed when a company and its employees make it their motto to do the right thing at all times and follow sound principles.

“Corporate governance should be done more through principles than rules.”
– Adi Godrej

Being merely profitable is not enough for a company. A company must showcase a sound moral compass through its ethical conduct and corporate governance in order to win over the faith of investors and customers alike. It also helps a company’s image to transform into a pillar of integrity, reliability and honesty for the entire world to see.  

Click here to delve deep into the principles of corporate governance and their effect on all the stakeholders involved.

Written by Gagan Dhawan

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