UNDERSTANDING CORPORATE GOVERNANCE

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Corporate governance is the actions of a board and top management that provide strategic direction, achieve the organisation’s goals, allocate resources, and manage risk. Countries and companies that don’t have strong corporate governance systems find it difficult to raise capital.

Many boards regard good governance as their main mission and try to build a culture of ethical values, transparency and fairness. They argue that well governed companies perform better in commercial terms. But compliance on its own cannot make a company successful. Companies must balance conformance with performance. Boards need to participate actively in strategy formulation and implementation, and drive the creation of wealth in all six capitals. A board has many responsibilities. These include selecting a CEO, succession planning, approving changes in strategy, setting top manager pay, and monitoring financial health, risk, and stakeholder communications. A typical board meeting might review capital plans and annual budgets, consider buying a new business, and elect a new board member. Boards use committees (remuneration, social responsibility, audit and risk) to spread their workload.
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Management
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