Corporate Governance

​Corporate Governance

​WHAT IS CORPORATE GOVERNANCE

Corporate governance is the system by which directors handle their responsibility toward stakeholders. Stakeholders are people or businesses who are affected by a company’s success or failure.

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​The purpose of corporate governance

The purpose of corporate governance is to help companies reach their objectives and balance the interests of various stakeholders. Corporate governance provides a structure that organizations use to monitor their own actions and decision-making. The intention is to make companies more responsible for their actions and to find and eliminate potential problems. Corporate governance determines roles and responsibilities for owners, managers, employees, and investors. It includes procedures for appointing executives, making important decisions, and setting organizational priorities.

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Multiple Choice

What is the purpose of corporate governance?

• To ensure accountability, fairness, and transparency in a company's operations.
• To limit shareholder influence on management.
• To maximize profits at any cost.
• To create a monopoly in the market.

​Principles of corporate governance

While governance policies vary greatly depending on the organization, some principles are commonly upheld and are important aspects of corporate governance. Those include:

·       Shareholder recognition: Shareholder recognition means that all shareholders of a company have a voice and are allowed to participate equally. Shareholders should have certain rights and functions that support their ownership of the organization.

·       Stakeholder interests: Organizations need to consider the concerns of all stakeholders, not just top-level executives or majority shareholders.

Multiple Choice

which of the following illustrates Stakeholders interest in Corporate governance

• Limiting communication with external parties.
• Maximizing short-term profits for shareholders.
• Ignoring regulatory compliance and ethical standards.
• Stakeholder engagement and accountability in decision-making.

​·       Board roles and responsibilities: All board members should have a unified idea about the board’s vision, committee practices, succession planning, and goals. The board should also include diverse viewpoints.

·       Ethical behavior: Corporate governance should include developing a code of conduct/code of ethics that guides the actions and decisions of employees. The corporate governance structure might also include policies on corporate social responsibility and sustainability.

·       Transparency: Transparency is maintaining open and honest communications. Transparency is an important aspect of corporate governance because it builds stakeholder trust. All stakeholders deserve to have a clear picture of the financial standing of the company.

Multiple Choice

Monitoring by shareholders is usually accomplished through

• management consultants

• government auditors

• the firm’s top managers

• board of directors

Multiple Choice

Define Stakeholder:

• An individual with high power over an organisation.

• An individual or organisation with financial decision making within a company.

• An individual, group or organisation that have a stake and influence over a business.

• An individual, group or organisation that don't have a stake and influence over a business.

Multiple Choice

True or False: stakeholders can be internal and external.

• True
• False, stakeholders can only be internal.

Multiple Choice

Which of the following is NOT an example of a stakeholder?

• Customers

• Shareholders

• Local Community 

• Children

Multiple Choice

What is it means by good board practices?

• Good board practices focus solely on financial performance.
• Good board practices are about personal relationships among board members.
• Good board practices prioritize individual interests over collective goals.
• Good board practices are principles that ensure effective governance and accountability in decision-making.

Multiple Choice

What is corporate governance?

• Handling the business

• A system by which directors handle their responsibility toward stakeholders.

• Business Guidelines that the owner must follow.

Multiple Select

Which is NOT TRUE about the needs for corporate governance?

• To avoid mismanagement

• To enable companies operate more efficiently, to improve access to capital, mitigate risk and safeguard stakeholders

• To increase the accountability of your company and to avoid massive disasters before they occur

• To analyze of an organization's operations and maintenance of systems of internal controls can help detect and prevent various forms of fraud and other accounting irregularities.

Multiple Choice

Who runs the company operations for large companies?

• Shareholders

• Board of Directors

• External auditors

• Stakeholders

Multiple Choice

Which is BEST definition for Corporate Governance?

• The marketing tactics employed by businesses.
• The legal framework governing employee rights.
• The financial strategies used by corporations.
• The systems and processes by which companies are directed and controlled.

​Benefits of corporate governance

Corporate governance encourages businesses to grow because it helps increase efficiency. Everyone’s priorities are in alignment, so they are working toward the same goals in the same ways. It also helps to create a strong brand and guide decision-making. Corporate governance increases accountability and

ensures that business goals and management practices are in line with all stakeholders’ interests. When there are policies in place to help organizations reach their objectives, it is easier for them to do so.

 

Corporate governance also builds a positive reputation. It helps organizations avoid scandals. Customers and clients are much more likely to work with a company that has a strong reputation for responsible corporate governance. Shareholders will be confident that the company is a good investment.

Multiple Choice

Corporate governance decreases accountability and

discourages business goals and management practices that should be in line with all stakeholders’ interests.

• True

• False

Multiple Choice

Good corporate governance helps with a companies reputation

• true

• false

• it depends

Multiple Choice

Which of the following best illustrates good corporate governance?

• Having a diverse and independent board of directors.
• Prioritizing short-term profits over long-term sustainability.
• Ignoring shareholder feedback and concerns.
• A board composed solely of family members.

​Consequences of poor corporate governance

When corporate governance structures are not executed well, many consequences can occur as a result. Ineffective governance makes a company appear irresponsible and untrustworthy. These companies will likely not perform well financially. Furthermore, lack of governance can lead to unethical and illegal actions. Scandals may follow, and companies might never fully recover.

 

Multiple Choice

Poor corporate Governance leads to all the following except

• Transparency

• Unethical Actions

• Untrustworthiness

• Scandals

Multiple Choice

Poor corporate governance could lead to:

• Increased employee satisfaction and morale.
• Higher market share and competitive advantage.
• Improved customer loyalty and trust.
• Financial losses and increased risk of fraud.

Multiple Choice

Which of the following best illustrate poor corporate governance?

• Clear communication of company goals and strategies.
• High levels of employee engagement and satisfaction.
• Lack of transparency and accountability in decision-making.
• Regular audits and compliance checks.

Relationship between corporate governance and ethics

1. Ethics informs governance: Ethical principles guide the development of governance structures, policies, and practices.

2. Governance promotes ethical behavior: Effective governance ensures that companies operate within a framework that encourages ethical decision-making and behavior.

3. Accountability and transparency: Governance mechanisms, such as auditing and disclosure, promote transparency and accountability, which are essential for ethical business practices.

4. Tone at the top: The board of directors and executives set the tone for ethical behavior within the organization, influencing the culture and values of the company.

Multiple Choice

How are corporate governance and ethics related?

• Corporate governance and ethics are completely unrelated concepts.
• Ethics have no impact on decision-making processes.
• Corporate governance and ethics are related as ethical practices are fundamental to effective governance, ensuring accountability and integrity in decision-making.
• Corporate governance is solely about financial performance.

Multiple Choice

How can ethics be illustrated in corporate governance?

• Through strict regulations only
• Ethics can be illustrated in corporate governance through a code of conduct, transparency, accountability, and a culture of integrity.
• By prioritizing profit over ethics
• By ignoring stakeholder interests