Corporate governance is a challenging subject of practice, policy www.boardroomdirect.blog/what-are-the-four-types-of-corporate-governance and ethics that entails many stakeholders. It is the system and structures that guarantee accountability, probity and transparency in reporting and operations of a company. It covers the way boards oversee the executives of a business and the selection, monitoring and evaluation of the CEO’s performances. It also covers the manner in which directors make financial choices and how they communicate their decisions to shareholders.
In the 1990s, corporate governance became a hot topic due the introduction of structural reforms to build markets in former Soviet states and the Asian Financial Crisis. The 2002 Enron scandal, followed by a surge of shareholder activism by institutional shareholders and the 2008 financial crisis, increased scrutiny. Corporate governance is a hot issue in the present, with new ideas and pressures constantly surfacing.
The most popular school of thought, commonly referred to as the «shareholder primacy» view or Anglo-Saxon approach, places a high priority on shareholders. Shareholders elect the board of Directors who direct management and sets strategic aims for the company. The board is responsible for choosing and reviewing the CEO, setting and monitoring the company’s risk management policies, directing the operations of the company, and submitting reports to shareholders regarding their stewardship.
Effective corporate governance is based on four principles that are integrity, transparency, accountability and fairness. Integrity relates to the ethical and responsible way in which board members make decisions. Transparency refers to openness honest, integrity, and complete disclosure of information to all stakeholders. Fairness concerns how boards treat employees, suppliers and clients. The responsibility of a board is how it deals with its members and the community as a whole.