What composes corporate governance?

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Ashley Kannan eNotes educator| Certified Educator

In the most basic of terms, corporate governance refers to how a company functions.  It is "the system by which companies are directed and controlled (Cadbury Committee, 1992)."  This includes the practices, philosophies, endeavors, and overall goals of a particular corporation or business.  Many different elements can define the exact system of corporate governance in terms of management structures, relationship with shareholders, as well as mechanisms that define economic efficiency.  As the current economic climate is one that has been particularly challenging for corporations as well as the setting in which corporate malfeasance has been more scrutinized, I think that the practices that define corporate governance are receiving more scrutiny.  This includes corporate commitment to shareholders and ensuring that shareholder rights are protected as well as transparency in accounting methods and in financial disclosures.  These elements have become more intrinsic to a modern understanding of what composes corporate governance.

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