Corporate governance describes the rules, processes, and laws by which a company is directed and controlled for the benefit of its shareholders and other stakeholders, including employees, customers, financers, and the communities in which the business operates.
Good corporate governance is vital to the integrity of financial institutions and markets and contributes to sustainable economic development by enhancing the performance of companies. Once a firm gets its corporate governance model right, with a strong and effective board of directors, everything else should flow from that. Success in preventing corporate disasters cannot be properly measured, so the positive benefits of governance cannot be fully known. But events in recent times, most notably during the global financial crisis, have highlighted the consequences of corporate governance failures.
Good governance starts at the boardroom table. The crisis highlighted the fact that the directors of leading banks and other financial institutions had failed to understand the risks they were taking or to hold their key executives to account. The corporate governance models at these firms weren’t robust enough to prevent crises and scandals, and ultimately government intervention was required to avert the collapse of the global financial and economic system.
