What do we know about the concept of corporate governance? The key words are ‘corporations’ and ‘governance’.
In plain terms, the concept explains the regulation of corporations. It deals with the agglomeration of the system of rules, customary practices, and the processes by which a firm is regulated.
Corporate governance also essentially involves balancing the interests of diverse entities, such as, a company’s shareholders, management board, customers, suppliers, financiers, creditors, host government, and the community where the company has its operations.
In recent times, in Nigeria, the issue of corporate governance has been in the spotlight, and has garnered attention from agencies of government and business leaders. This has prompted agencies of government to develop corporate governance models that enable businesses to operate in the best interest of investors and customers.
Why is corporate governance important?
It is the heartbeat of every corporation because it is the key to its continued existence.
It plays a significant role in the provision of jobs, and in the improvement of workers’ standard of living.
It helps to guarantee the increase of the host government’s income from taxes.
Highlighted below are the principles of corporate governance that every corporation must pay attention to;
- Integrity and ethical behavior of the company and its officers.
- The role and responsibility of company’s appointed directors.
- Protecting the interest of stakeholders.
- Safeguarding the rights and equitable interest of shareholders.
- Director’s disclosure of interest and transparency of the Boards and its directors.
A regime of bad corporate governance can cast doubt on a company’s trustworthiness and integrity. This can have grave implications on the company’s financial health. For instance, Volkswagen AG in 2015, rigged engine emissions tests in America and Europe. Volkswagen saw its stocks shed nearly half its value in the days following the start of the scandal, and its global sales in the first full month following the news fell 4.5%.
In conclusion, every company must embrace sound corporate governance practices in other to ensure sustainability and profitability.