Understanding Corporate Governance

Corporate governance refers to a system of rules, practices, and processes by which a company is directed and controlled. It encompasses the mechanisms through which a company’s objectives are set and pursued, reflecting the interests of stakeholders. Corporate governance involves balancing the interests of a company's many stakeholders, such as shareholders, management, customers, suppliers, financiers, government, and the community. It provides a framework for attaining a company’s objectives, encompassing practically every sphere of management, from action plans and internal controls to performance measurement and corporate disclosure.

The term “corporate governance” can seem complex, but at its core, it’s about the processes and structures used to manage the business and affairs of a company. The purpose is to ensure the company operates efficiently and ethically, providing a fair return to shareholders, safeguarding the interests of other stakeholders, and adhering to applicable laws and regulations. Good corporate governance creates a transparent set of rules and controls in which shareholders, directors, and officers have aligned incentives. It ensures accountability, fairness, and transparency in a company's relationship with all its stakeholders.

In India, corporate governance gained significant attention following various corporate scandals and economic liberalization in the early 1990s. This led to a demand for transparency and accountability in the business world. The introduction of the Companies Act, 2013, and the regulations by the Securities and Exchange Board of India (SEBI) provided a robust framework for corporate governance practices in India. The focus on governance standards has increased, ensuring that companies follow ethical practices and maintain transparency with their stakeholders.




Last modified: Friday, 18 October 2024, 11:02 AM