Topic 1 - Corporate Governance Flashcards
(9 cards)
What is the definition of Corporate Governance?
Ensure that the company is run and managed to achieve the company’s mission and vision, in accordance with the stakeholders’ needs.
What is the role of corporate governance in public companies?
Corporate governance is heavily relied on in Stock Exchanges where public companies are run by senior management on behalf of shareholders. There is a need to ensure that these senior management do not act in a manner that benefits themselves at the expense of the public good.
What is the function of the board of directors in corporate governance?
Board of directors are appointed to ensure accountability and also to define the objectives of the organization.
How does corporate governance apply to private companies?
For private companies, corporate governance helps to ensure that the company is run according to the shareholder’s expectations (especially its owners).
What is the role of corporate governance in government agencies?
In government agencies, a board of directors are appointed to ensure the organization achieves its stated objectives (as defined by the government).
Why is governance needed in an enterprise?
Governance is needed to ensure an enterprise is ‘doing the right thing’ (achieve the aims of its owners whilst ensuring that the interests of its stakeholders are kept intact).
What are the 6 OECD principles of corporate governance?
- Ensuring the basis for an effective corporate governance framework (should support open and fair markets, follow the law, and clearly explain who is responsible for what among regulators and supervisors). 2. The rights of shareholders and key ownership functions (should protect and facilitate the exercise of shareholder’s rights). 3. The equitable treatment of shareholders (should treat all shareholders fairly, including small and foreign investors. Everyone should have a way to seek justice if their rights are violated). 4. The role of stakeholders in corporate governance (should respect the rights of stakeholders, as set by law or agreements, and promote teamwork between companies and stakeholders to create wealth, jobs, and long-term business success). 5. Disclosure and transparency (should make sure the company shares important information like its finances, performance, ownership, and how it’s run clearly and on time). 6. The responsibility of the board (should make sure the company has clear direction, that the board properly oversees management, and that the board is accountable to both the company and its shareholders).
Who are the owners in corporate governance?
Owners are people/organizations who own the enterprise (e.g., shareholders in public companies).
Who are stakeholders in corporate governance?
Stakeholders are people whose interests affect or are affected by the activities of the enterprise (can include owners, government, board of directors, employees, customers, public, etc.).
