Introduction and Principles of Corporate Governance

Corporate governance, in general, refers to the processes used to direct and control businesses. This concept is related to the management and control of the office structure. The prestigious Cadbury Committee described “Corporate Governance” in its report (corporate finance management, published in 1992) as “the system by which companies are administered and regulated”. Corporate governance, in simple words, is the office administration that is fair, ethical, and transparent. The aim is to provide maximum benefits to the shareholders of the company.

Principles of Corporate Governance:

• Accountability and Transparency: The Code outlines the Company’s Board of Directors’ responsibility to all shareholders in accordance with applicable law, as well as offering guidance to the Board of Directors in making decisions and overseeing the operations of the executive bodies. All stakeholders are entitled to timely and accurate disclosure of all relevant facts relating to the Company’s activities, including its financial status, social and environmental indicators, results, ownership structure, and governance, as well as unfettered access to such information.

• Shareholder Rights and Fair Treatment: Companies should respect shareholders’ rights and support them in exercising their rights. They can assist shareholders in exercising their rights by encouraging shareholders to attend frequent meetings and communicating openly and effectively with them.

• Fairness: The Company is committed to protecting shareholders’ interests and treating all shareholders equitably. The Board of Directors must offer effective remedies to all shareholders who have had their rights violated.

⇒ Non-shareholder stakeholders, such as employees, investors, lenders, suppliers, local communities, customers, and politicians, should be aware that organisations have legal, contractual, social, and market obligations to them.             

• Responsibility: To the extent permitted by law, the Business recognises the interests of all interested parties and strives to collaborate with them for their own growth and financial stability.

⇒ The Board’s Roles and Responsibilities: The Board must be equipped with the knowledge and skills to evaluate and question management performance. It also necessitates the appropriate size as well as the appropriate levels of independence and dedication.                             

• Integrity and Ethics: When selecting firm executives and board members, integrity should be a must. Organisations that support sound decision-making must create a code of conduct for directors and officials.
• Disclosure and Transparency: In order to provide stakeholders with a level of accountability, organisations should clarify and make clear the duties and responsibilities of the board and management. They should also put in place measures to preserve autonomy and defend the financial reporting integrity of the organisation.