Corporations are created by laws and regulations of a jurisdiction and subject to common law in some countries. The Sarbanes-Oxley Act of 2002 established corporate governance requirements in the US in response to corporate scandals. Corporate governance principles have been developed by different entities to reduce inefficiencies through internal and external monitoring systems.

1. CORPORATE GOVERNANCE

2. Corporations are created as legal persons by the laws and
regulations of a particular jurisdiction. In addition to the
statutory laws of the relevant jurisdiction, corporations are
subject to common law in some countries, and various laws
and regulations affecting business practices.
Sarbanes-Oxley Act of 2002
The Sarbanes-Oxley Act of 2002 was enacted in the wake of
a series of high profile corporate scandals. It established a
series of requirements that affect corporate governance in
the U.S. and influenced similar laws in many other
countries.

3. Corporate governance principles and codes have been
developed in different countries and issued from stock
exchanges, corporations, institutional investors, or
associations (institutes) of directors and managers with the
support of governments and international organizations
Other guidelines

5. Corporate governance mechanisms and controls are designed to reduce
the inefficiencies that arise from moral hazard and adverse selection. There
are both internal monitoring systems and external monitoring systems.
External corporate governance controls
• Competition
• government regulations
• media pressure

6. Internal corporate governance controls monitor activities and then
take corrective action to accomplish organisational goals.
 Monitoring by the board of directors
 Internal control procedures and internal auditors
 Balance of power

7. • Demand for information
• Monitoring costs
• Supply of accounting information