What is corporate governance?
Corporate governance refers to how a company is governed by its management. Governance in all aspects of how a company is run, from how operations are run, to how finances are managed to the level of risk that is taken on among many others affects all the shareholders and stakeholders of a company.
A well governed company is one where the management treats all shareholders in an equal manner and respects their rights. Decisions should not be taken under the influence of the majority shareholders that benefit them at the expense of minority shareholders. In addition to shareholders other stakeholder's interest should also be kept in mind while making decisions.
The board of management of a well governed company ensures that the company has a strict code of ethics that is adhered to at all times by everyone. There should be a zero tolerance for any unethical practices going on in the company. The management should also be transparent and disclose any information about how the company is being run for the benefit of shareholders and prospective investors.
Corporate governance is the supervision of the most macro-level functions of the firm. It is, therefore, different from the management of the day to day operations of the firm.
Corporate governance happens at the highest levels of the firm. It is the responsibility of the board of directors and the highest officers of the firm. Corporate governance is the process of setting the fundamental strategic goals of the firm. It also includes such actions as the selection of the chief executive officer of the firm that will have a major impact on the firm's strategy.
Corporate governance, then, is the macro-level direction of a company that is exerted by the highest levels of the firm on behalf of the firm's owners (the shareholders).
Next to corporate governance there is for big family owned companies also something like family governance. Family Governance organises almost the same as corporate governance, but than including the sometimes difficult relationships within a wealthy family. A family office mostly supports wealthy business owners with bringing the best family governance into place.