Benefits of Good Governance

The concept of Governance is simple the system designed to control and distribute power within an organization. According to Hoel (2011), good corporate governance involves having a good leadership structure and the complex system of incentives, checks and balances that makes sure that the organization creates long-term

According to Crowther (2010), governance is significant to continue the growths and benefits of any organization. Therefore, to work company better good governance is the

1. This article focuses on the Gompers, Ishii, and Metrick (GIM, 2003) study which found that strong shareholder rights lead to higher stock price returns and thus value. This is a great indicator that good governance has a direct effect on the performance of the firm. The article finds that corporate governance has a positive impact on the firm / management / shareholders. However good governance is not always the correct metric of evaluation for firms and boards. The primary finding of the article is from an economic analysis defending the relation between corporate governance and performance. This article examines the relationships among corporate governance / corporate performance / capital structure / and corporate ownership structure. Many of the past studies have taken into consideration only one measure of governance, while this study focused on seven different governance measures. The article also looks at the performance of a firm and the relationship it has with management turnover or disciplinary actions required.

Corporate governance is a process or structure implemented in order to properly direct, manage and control the business in both non-moral and moral sense. Non-moral practice of effective corporate governance includes efficient strategic planning and decision making, appropriate resource allocation and hiring and managing productive workforce. Meanwhile in moral sense of effective governance the corporation has to achieve transparency, fairness and honesty between board of directors, management and other parties involved in business. http://www.uniassignment.com/essay-samples/accounting/what-is-good-corporate-governance-accounting-essay.php ). Poor corporate governance in terms of its non-moral sense can cause higher risk and lower return, while

Corporate governance mainly involves balancing the interests of the company 's many stakeholders, including its shareholders, management, customers, suppliers, financial institutions, governments and the community. Since corporate governance is also provided a method for obtaining the

Arthur Levitt, a former SEC chairman, defined corporate governance as “the link between a company’s management, directors, and its financial reporting system” (as cited in Hermanson & Rittenberg, 2003). The core of good corporate governance is guaranteeing open and reliable relations between an organization and its shareholders. Good governance is thus a culture of dependability, transparency, accountability, and fairness that is deployed throughout the organization. It is important for economic development, for both the individual organization, and the economy as a whole. Thus, the quality of corporate governance needs to be continuously assessed and improved, and it should be consistently promoted within organizations. However, corporate governance can only be upheld and improved within organizations if it is measured continuously (Argüden, 2010). This is where auditors, audit committees and the board of directors come in. This paper will mostly focus on how auditors can assess corporate governance in an organization.

The corporate governance structure specifies the distribution of rights and responsibilities among different participants in the corporation, such as the board, managers, shareholders and other stakeholders, and spells out the rules and procedures for making decisions on corporate affairs. By doing this, it also provides the structure through which the company objectives are set, and the means of attaining those objectives and monitoring performance. Therefore, the overall purpose of good governance: to assist organisations to achieve their strategic objectives.

The implementation of an effective corporate governance framework can contribute to better performance and market valuation of shares.

Good corporate governance encourages shareholder confidence, which is important to the ability of individuals listed on the ASX to compete for capital. Below governance practices a listed entity chooses to adopt is basically a matter for its board of directors, the body charged with the lawful responsibility for handling its business with due care and assiduousness and therefore for ensuring that it has suitable governance preparations in place. (ASX, 2014)

The purpose of corporate governance is not just to monitor, it is also to provide guidance to those in charge of running companies, board members, managers, shareholders etc. to operate, act ethically and responsibly. It also attempts to bring accountability to the fore, making provisions to safeguard against the misuse of resources whether those resources are identified as financial, human capital or intellectual property.

It is well established that good corporate governance practice is beneficial for firms, its stakeholders and whole economy. Further based on studies such as by Levine (2004), saving rates, investment decisions, technological progress and consequently economic growth are encouraged as financial systems reduce market frictions. So developing countries require reforms to stimulate financial system for revival of economy.

Competitive business environment and appropriate good Corporate Governance have a nexus, the former fuelling, influencing and impacting the latter and the latter seeking to meet the challenges of the former. For Corporate Governance, inhering Competition principles in policy making would appear sine qua non. Corporate Governance consequently needs to fashion itself to meet Competition and prevent enterprises indulge in (inadvertently or otherwise) anti-competitive practices. Corporate Governance needs to incorporate the interests of consumers and economic development. Competition maximizes incentives to innovate, engage in new promising activities, offer better services and wider choices at lower prices. The continuous quest for efficiency and improvement is not merely a result of the competitive process, it is the competitive process, where companies- small, medium-sized or large- concentrate on becoming as efficient as possible, rather than on surviving by other (illegal) means, their competitiveness will increase whether they operate in their domestic market or in the worldwide stage. Competition law understood the need of good corporate governance for fair competition. The need for implementation of good Corporate Governance strategy is not only social, but there are good economic reasons also. The Companies possessing Governance practices are more likely to gain a competitive advantage over their counterparts. The benefits that

In recent times, corporate governance has attracted much attention both in academic literature and press media. Corporate Governance is related to effective, transparent and accountable administration of affairs of an institution by its management, while protecting the interest of its stakeholders comprising of the shareholders, creditors, regulators and the public at large. But the implementation of Corporate Governance principles is not an easy task. It is a very wide subject and needs a lot of discussion.

Corporate Governance is a buzz word in the business world. It is envisioned to enhance the accountability of a concern and to evade huge disasters before they occur. The concept of corporate governance dived to global attention after the sudden crashes of Enron, World Com, Xerox, Lehman Brothers, Parmalat, Satyam etc. The failure of these colossal business houses horrified the corporate world with their unethical and unlawful operations which affected the employment, finances of national and local government worldwide and international economy. The history of these scandals have forced all the corporates to have substantial and clear record of wealth creation and transparency over a period of time.

A dynamic and fundamental view of business nowadays is presented in corporate governance. As a term, governance comes from a Latin word gubernar means to guide; describing the main purpose of modern governance which is guiding relations between different counterparties. That emphasizes directing function rather than monitoring function. The definitions of corporate governance always concentrate on shareholders’ relations with their companies. The new definitions of governance mention on accountability to various stakeholders as a significant role of governance. Successful business is badly needed for corporate governance as well it is significantly for social and environmental benefits, which cannot be ignored. Global financial crisis and companies collapsing caused of a weak governance system have spotlighted the need of improving corporate governance. The crises has pushed countries to issues regulations in order to protect financial markets such as Sarbanes-Oxley 2002 in United States of America and Higgs report 2003 in United Kingdom presenting quick respond on financial crisis and failures of corporate governance. The lesson of current crisis requests from researches to look on the structure of incentives and on a poor controlling system. That led to review corporate governance concepts and to modify and issue new recommendations to improve governance practices such