Four Pillars of Corporate Governance
Four Pillars of Corporate Governance: The value of corporate governance may well lie on its four pillars, on which the OECD Principles of corporate Governance are based.
“Sunlight is the best disinfectant“
The corporate governance framework should ensure that timely and accurate disclosure is made on all matters regarding the company, including its financial situation, performance, ownership, and governance structure.
“You can’t manage what you can not measure“
The corporate governance framework should provide for the strategic guidance of the company, the effective monitoring of management by the board, and the board’s accountability to the company and shareholders.
“The fairness of markets is closely linked to investor protection and, in particular, to prevention of improper trading practices, which leads to confidence in the markets“
The corporate governance framework should protect shareholder rights and ensure the equitable treatment of all stakeholders, including minority and foreign shareholders.
An effective system of corporate governance must strive to channel the self-interests of managers, directors, and the advisers upon whom they rely, into alignment with corporate , shareholder and public interests.
Who are the Primary stakeholders within Corporate Governance framework?
Primary stakeholders are:
- Board of Directors or Managing Boards
- Executive Management
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Who are some of the other stakeholders within Corporate Governance framework?
- Communities in which the companies operate
Why do we need corporate governance and the Four Pillars of Corporate Governance?
- Good corporate governance contributes to competitiveness, facilitates corporate access to capital markets, and thus helps develop financial markets and spur economic growth.
- Institutional investors would be willing to pay more for shares in companies that exhibited high governance standards
- Investors are increasing willing to pay a premium for well-governed companies that adhere to good board practices, provide for information disclose and financial transparency, and respect shareholders’ right.
- Well-governed companies are also better positioned to fulfill their economic, environmental, and social responsibilities, and to contribute to sustainable growth (for themselves as well as their employees).
- Better corporate governance also leads to an improvement in the accountability system, minimizing the risk of fraud or self -dealing by company officers.
Corporate Governance and ethics
“Corporate Governance is …holding the balance between economic and social goals and between individual and communal goals. the governance framework is there to encourage the efficient use of resources and equally to require accountability for the stewardship of these resources.
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The aim is to align as nearly as possible the interests of individuals, corporations, and society. the incentives to corporations is to achieve their corporate aims and to attract investment” – Sir Adrian Cabury.
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