Corporate governance is a system; it is not a job title or a specific
role. It is a system that guides the conduct of the people within an
organization, as well as the direction of the organization itself.
Corporate governance is altogether different from the daily
operational decisions and activities that are executed by the
management of an organization. Corporate governance is the
domain of the Board of Directors, as opposed to its management
team (Peterdy 2022). If the company is under a poor corporate
governance, it will loss the shareholders’ confidence and trust,
difficult to raise capital, and so on. b Therefore, a good corporate
governance is necessary for every company. A healthy corporate
governance function requires a clear and formal division of
responsibilities between management and the board of directors.
Corporate governance covers areas such as environmental
awareness, ethical behavior, corporate strategy, compensation, and
risk management. Its basic principles are accountability,
transparency, fairness, responsibility, and risk management.
Changing market dynamics and economic realities put pressure on
the corporate governance functions of organizations. Some
components of corporate governance that I believe are essential and
important in a professional environment. First, the board of directors
plays an important role in company. Therefore, the most effective
boards should have most independent directors who are able to
oversee the company's management and independent committees
for the benefit of shareholders. Second auditors should be
independent, and most of their income should come from audit
activities, not consulting services. b Accounting issues should be
handled in a transparent manner, complete and detailed information
and reports should always be available to the board (Forsythe 2018).
Third, companies need to take reasonable account of proxy voting
and shareholder influence. Shareholders must have the ability to use
their vote to send a message to the board. While corporate
governance plays a key role in corporate development, ethical
responsibility is playing an increasingly influential role. Ethical
liability occurs when companies violate stakeholder expectations for
ethical behavior, putting business values at risk. These two forms of
responsibility are increasingly converging, as companies are subject
to both legal and public opinion oversight - often more direct and
pointed (Clarke).
Reference:
Mintz, Steven M. & Morris Roselyn E. Ethical Obligations and
Decision Making in Accounting.
Mcgraw Hill Education (5th edition)
Peterdy, Kyle. August 16, 2022. Corporate Governance
https://corporatefinanceinstitute.com/resources/knowledge/other/c
orporate-governance/
Forsythe, Aimee B. July 24, 2018. Six Essential Elements of Effective
Corporate Governance
https://www.cambridgetrust.com/insights/investing-economy/six-
essential-elements-of-effective-corporate-gove
Clarke, Thomas. Ethics, Value and Corporate Governance.
https://www.bbvaopenmind.com/en/articles/ethics-values-and-
corporate-governance/
