It is a new discipline of management which evolved in the last quarter of the 20th century. Though relatively new in the management circle, the issue of corporate governance is one of the leading issues in leadership and management. Corporate governance is equated to corporate management.
The emphasis is laid on the role that the board plays in guiding management towards corporate success on the other hand; emphasis is placed on the role of independent directors or similar bodies in ensuring that corporate executives or directors are themselves made accountable and supervised.
Corporate governance can also be understood by defining it in terms of organizational outcomes. Corporations are created to achieve the desired outcomes of their “creators” it therefore follows that if these objectives are met then the corporation is well governed. From this perspective it can be defined as the process whereby organizations are led towards achievement of objectives for
which they were founded.
Corporations are governed and managed not by their owners but through the process of agency. These agents might be governors, managers and other employees they have entrusted to govern the corporation on behalf of the owners.
Elements of good corporate governance
Since agents are custodian trustees and stewards of the organization they are answerable and accountable to the owners.
For successful corporate governance the role of shareholders directors and other employees must be clearly defined. The directors must be made accountable to somebody. They must be clearly aware of the fact that failure to give a good account will not go unpunished.
Good corporate governance should ensure the following:-
1) Enterprise prosperity and survival:-
Corporations must be managed efficiently and effectively to ensure prosperity and survival. When they prosper they generate wealth and promote well-being of both the stakeholders and the society.
2) Ethics, integrity and responsibility
Organizations must be lead on the premise that the highest standards of integrity and ethics be maintained. Abuse of powers, corruption, laziness, conflict of interest and other such vices can all ruin organizations. The people appointed to new organizations must be fair, transparent and responsive.
3) Employee participation in decision making i.e. employee empowerment. Quality circles suggest that workers have increasing influence on what occurs in the work place.
4) Administration of justice on employees and other stakeholders through the application of rules and regulations.
5) Protection of employees right to employment by providing job security to employees
6) Establishment of positive corporate culture.