Corporate governance is a term that refers broadly to the rules, processes, or laws by
which businesses are operated, regulated, and controlled. The term can refer to
internal factors defined by the officers, stockholders or constitution of a corporation, as
well as to external forces such as consumer groups, clients, and government
The framework of rules and practices by which a board of directors ensures
accountability, fairness, and transparency in a company's relationship with its all
stakeholders (financiers, customers, management, employees, government, and the
Corporate Governance deals with the manner the providers of finance guarantee
themselves of getting a fair return on their investment. Corporate Governance clearly
distinguishes between the owners and the managers. The managers are the deciding
authority. In modern corporations, the functions/ tasks of owners and managers should
be clearly defined, rather harmonizing.
Corporate Governance deals with determining ways to take effective strategic
decisions. It gives ultimate authority and complete responsibility to the Board of
Directors. In today’s market- oriented economy, the need for corporate governance
arises. Also, efficiency as well as globalization are significant factors urging corporate
governance. Corporate Governance is essential to develop added value to the
Corporate Governance deals with determining ways to take effective strategic decisions.
It gives ultimate authority and complete responsibility to the Board of Directors. In today’s
market- oriented economy, the need for corporate governance arises. Also, efficiency as
well as globalization are significant factors urging corporate governance. Corporate
Governance is essential to develop added value to the stakeholders
Corporate Governance ensures transparency which ensures strong and balanced
economic development. This also ensures that the interests of all shareholders (majority
as well as minority shareholders) are safeguarded. It ensures that all shareholders fully
exercise their rights and that the organization fully recognizes their rights.
Corporate Governance has a broad scope. It includes both social and institutional
aspects. Corporate Governance encourages a trustworthy, moral, as well as ethical
Four Pillars Of Corporate
1) Accountability - Ensure that management is accountable to the Board
- Ensure that the Board is accountable to shareholders
- Protect Shareholders rights
-Treat all shareholders including minorities, equitably
- Provide effective redress for violations
3) Transparency - Ensure timely, accurate disclosure on all material matters,
including the financial situation, performance, ownership
and corporate governance
- Procedures and structures are in place so as to minimise, or
avoid completely conflicts of interest.
- Independent Directors and Advisers i.e. free from the
influence of others
Good corporate governance ensures corporate success and economic growth.
Strong corporate governance maintains investors’ confidence, as a result of
which, company can raise capital efficiently and effectively.
It lowers the capital cost.
There is a positive impact on the share price.
It provides proper inducement to the owners as well as managers to achieve
objectives that are in interests of the shareholders and the organization.
Good corporate governance also minimizes wastages, corruption, risks and
It helps in brand formation and development.
It ensures organization in managed in a manner that fits the best interests of all.
Effective corporate governance is also of interest to nations. As stated
by one scholar, “Every country wants the firms that operate within its
borders to flourish and grow in such ways as to provide
employment, wealth, and satisfaction, not only to improve standards of
living materially but also to enhance social cohesion.
Four internal governance mechanisms and a single external one are
used in the modern corporation. The three internal governance
mechanisms examined here are ;
Ownership concentration, as represented by types of shareholders
and their different incentives to monitor managers,
(2) The board of directors, and
(3) Executive compensation. The external governance mechanism is the
market for corporate control.
Corp Governance Explained
Governance mechanisms and issues that will be discussed in this module
include the following:
types of shareholders and their incentives to monitor managers
boards of directors
the market for corporate control
a comparison of the Zimbabwean. governance systems
U.K, U.S, German, and Japanese systems
1. On whose behalf should corporate boards direct and control the activities of the organization?
2. Why do corporate directors need to be concerned about more than the conflict in any part of their
3. Why do corporate governance best practices limit possibilities to improve corporate governance
4. How does corporate governance (CG) make improving existing corporate governance best practices
5. How could governance committees apply CG to create a corporate environment that delivers
sustainable business performance and adapts to changing conditions for business?