Corporate Governance.

What is Corporate ‘Good Governance’: –

It can be defined as:

  1. Transparent, fair and ethical corporate behaviour.
  2. Full and accurate disclosure of financial and operational information.
  3. Adherence to letter and spirit of law.
  4. 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’:-

  1. 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.
  2. 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:

  1. 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.
  2. All stakeholders should have comparable powers and authority to check and balance each other into collaborations and cooperation.
  3. All stakeholders should understand that it is a process that takes time and patience.

 

Source: The Indian Express