Types of Corporate Governance

Corporate governance is a complex area of policy, practice and ethics that has many stakeholders. It is the system and structures that guarantee accountability, transparency and probity in company operations and reporting. It includes the way in which boards supervise the executive management of a business and how they select to monitor and evaluate the CEO’s performance. It also covers the manner in which directors make financial decisions and how they communicate their decisions to shareholders.

Corporate Governance became a subject of intense https://boardroomdirect.blog/what-are-the-four-types-of-corporate-governance/ debate in the 1990s after the introduction of structural reforms to build markets in former Soviet states and the Asian financial crisis. The Enron scandal of 2002, followed by the emergence of shareholder activism within institutions, and the 2008 financial crisis has led to increased scrutiny. Corporate governance is a hot issue today, with new innovations and new pressures constantly appearing.

The Anglo-Saxon or “shareholder primary view” places the primary responsibility on shareholders. Shareholders elect the board of directors which oversees management and establishes the strategic objectives for the company. The board has the responsibility to select and assess the CEO, establish and monitor the enterprise policies on risk management and oversee the company’s operation. They also provide reports on their management to shareholders.

Integrity as well as transparency, fairness and responsibility are the four core principles of a successful corporate governance. Integrity is the ethical and responsible way board members make decisions. Transparency refers to transparency honest, integrity, and complete public disclosure of information to all stakeholders. Fairness relates to how boards treat their employees as well as their suppliers and customers. Responsibility is how the board treats its own members and the entire community.