Corporate Governance : How Corporations Are Managed

2041 Words Sep 17th, 2014 9 Pages
Corporate Governance

Corporations control a large part of the recourses of this planet and they are major form of economic organization. That is why our lives are affected by how corporations are managed. Decisions made by the people who run corporations not only impact the lives of individuals directly involved with the particular corporations but also has a much wider impact in the society. That is why corporate governance is significant because in simple term corporate governance means how a corporation is directed and controlled (Cadbury Committee, 1992, introduction).
Definitions of corporate governance are many. According to Organization for Economic Co-operation and Development (OECD), “Procedures and processes according to which an organization is directed and controlled. The corporate governance structure specifies the distribution of rights and responsibilities among the different participants in the organization – such as the board, managers, shareholders and other stakeholders – and lays down the rules and procedures for decision-making.”(Reference)

According to ASX “Corporate governance influences how the objectives of the company are set and achieved, how risk is monitored and assessed, and how performance is optimized.” (Reference)

The Figure above shows the parties involved in corporate governance including:
• Shareholders: These parties are those that own the company. They provide resources to the company to operate effectively.
• Directors: These…
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