Corporate governance

Corporate governance is the method by which a corporation is directed, administered or controlled. Corporate governance includes the laws and customs affecting that direction, as well as the goals for which the corporation is governed. The principal participants are the shareholders, management and the board of directors. Other participants include regulators, employees, suppliers, partners, customers, constituents (for elected bodies) and the general community.

Related Topics:
Corporation - Governance - Shareholder - Management - Board of directors

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As a result of the separation of stakeholder influence from control in modern organisations, a system of corporate governance controls is implemented on behalf of stakeholders to reduce agency costs and information asymmetry. Corporate governance is used to monitor whether outcomes are in accordance with plans; and to motivate the organisation to be more fully informed in order to maintain or alter organisational activity. Primarily though, corporate governance is the mechanism via which individuals are motivated to align their actual behaviours with the overall corporate good (ie maximum aggregate value generated by the organisation and shared fairly amongst all participants).

Related Topics:
Agency cost - Information asymmetry

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Recently there has been considerable interest in the corporate governance practices of modern corporations, particularly since the high-profile collapses of firms such as Enron Corporation.

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