The Essential Component of Corporate Governance

9749 Words Jul 31st, 2010 39 Pages
Center for International Private Enterprise

ECONOMICREFORM
Feature Service®
January 12, 2006

Business Ethics: The Essential Component of Corporate Governance
John D. Sullivan, Ph.D.
Executive Director, CIPE

Aleksandr Shkolnikov,
Program Officer, Global, CIPE

Given financial scandals and the resulting new mandates on business, firms find themselves pressed to develop strong codes of ethics to guide the behavior of board members, managers, and employees. Although the concern with ethics has always been a part of doing business, business leaders today are beginning to think about ethics as a set of principles and guides of behavior rather than a set of rigid rules. In this sense, business ethics is not only an attempt to set a standard by
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2. The Rights of Shareholders and Key Ownership Functions: The corporate governance framework should protect and facilitate the exercise of shareholders’ rights. 3. The Equitable Treatment of Shareholders: The corporate governance framework should ensure the equitable treatment of all shareholders, including minority and foreign shareholders. All shareholders should have the opportunity to obtain effective redress for violation of their rights. 4. The Role of Stakeholders in Corporate Governance: The corporate governance framework should recognise the rights of stakeholders established by law or through mutual agreements and encourage active co-operation between corporations and stakeholders in creating wealth, jobs, and the sustainability of financially sound enterprises. 5. Disclosure and Transparency: The corporate governance framework should ensure that timely and accurate disclosure is made on all material matters regarding the corporation, including the financial situation, performance, ownership, and governance of the company. 6. The Responsibilities of the Board: The corporate governance framework should ensure the strategic guidance of the company, the effective monitoring of management by the board, and the board’s accountability to the company and the shareholders. For more information see

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