Corporate governance refers to the issues
associated with the way corporations are structured, managed and operated. The
use of the term “corporate governance”, the evolution of the concept and what
it entails has started in the early 1980’s.
Among the first was the Cadbury Committee. They defined the purpose of corporate governance in 1992 namely, as a set of processes, customs and policies that frame the business of the company and help manage the subsidiaries. This is then operationalized in a uniform method through administered or controlled directives.
The most quoted and referred to document in
this field is the OECD principles corporate governance. OECD defines it as a
set of relationships between a company’s management, its board, its
shareholders, and other stakeholders. Corporate governance also provides the
structure through which the objectives of the company are set. The means of
attaining those objectives and performance monitoring are determined. So, the
main recommended principles are stated as rights and equitable treatment of
shareholders, interests of other stakeholders, role and responsibilities of the
board, integrity and ethical behavior, disclosure and transparency.
Good corporate governance has to establish a
culture based on a foundation of sound business ethics in order to fulfill the
long-term strategic goal of the owners. It should, particularly, consider and
care for the interests of employees, past, present and future and take account
of the needs of the environment and the local community. It covers NGOs,
Central and Local Government organizations even non listed companies with a single
shareholder.
Corporate governance is a unified business
system that can cope with the corporate culture which differs from one to
another subsidiary. The unification of the corporate culture throughout a company
and subsidiaries has been proven the mission impossible by Geert Hoefstede's
Model of Cultural Dimension during his project within IBM in the years 1967 –
1973.
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| USA vs. China - Culture differences |
Corporate governance is a continual process
of changes in a company and not one time action. This process consequently
changes the corporate culture. Corporate governance may also be described as
accountability of people in the business or entity. It is led by people
(leaders) that have vision and their goals are driven by a need to make a
difference. As these leaders see things others do not even perceive, they get
things right more often than they get them wrong.
This is a very informative article. Corporate governance is essential in a multicultural organization as it will improve the performance as well as motivate the employees to do better. You can find more information on this here – Leadership training.
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