What is Corporate ‘Good Governance’: –
It can be defined as:
- Transparent, fair and ethical corporate behaviour.
- Full and accurate disclosure of financial and operational information.
- Adherence to letter and spirit of law.
- Lastly, corporate social responsibility (which is a process that balances the demands of the shareholders for maximum dividends and capital appreciation with the pressures to contribute to societal welfare).
What are the benefits of corporate ‘Good Governance’:-
- Reputation consists of most of company’s value. A NGO, Reputation Institute, approximates that intangibles like reputation make up 81% of company’s value. It yields better access to capital, better credit terms, stock market performance and attracts the best talent.
- On the other hand, ‘poor governance’, such as showcased in instances of Infosys and Aramco can lead to values plummeting overnight.
How can corporate good governance be achieved: –
A stakeholder approach to the problem can be taken:
- A process needs to be created that balances incentive structure that motivates the generation of financial returns through societal welfare than the current structure that regards one as a trade-off for the other.
- All stakeholders should have comparable powers and authority to check and balance each other into collaborations and cooperation.
- All stakeholders should understand that it is a process that takes time and patience.
Source: The Indian Express
Categories: POINT IAS