Corporate Governance: (Important part of creating an ethical culture)

a.) Philosphy that corporations have for running themselves

b.) a set of mechanisms, proceedures and aproaches that guarantee that investors in the corporation
will receive a return on their investment
c.) method to be shure that managers at the top of corporations that their interests are correlated with
the people that own the corporation stockholders.
Corporate governance is the formal system of rules and practices by which a board of directors ensures
accountability, fairness, and transparency in a company's relationship with its all stakeholders.
Accourding to Business Ethics: Ethical Decision Making & Cases File Ferrell Fraedrich, it is the
formal system of accountability and control of ethical and socially responsible behavior. Corporate
governance establishes fundamental systems and processes: for
preventing and detecting misconduct, for investigating and disciplining, and for recovery
and continuous improvement. Effective corporate governance creates a compliance and
ethics culture so that employees feel that integrity is at the core of competitiveness.
Best Practises of Corporate Governance:
1. Laying Solid Foudations for Management and oversight
Recognizing and publishing the respective roles and responsibilites of board and
management.
The companies framework should be designed to:
enable the board to provide strategic guidance for the company and effective overshight of
management.
Clarify the respective roles and responsibilites of board members and senior executives in
order to facilitate board and management accountability to both the company and its
shareholders.
ensure a balance of authority so that no single individual has unrestricted powers
2. Structure the Board to add value.
Build a strong, qualified board of directors and evaluate performance. An effective board is
one that facilitates the efficient discharge of the duties imposed by law on the directors and adds
value in the context of the particular company's circumstances.
Boards should be comprised of directors who are knowledgeable and have expertise relevant
to the business and are qualified and competent, and have strong ethics and integrity, diverse
backgrounds and skills sets, and sufficient time to commit to their duties. One of the ways to
achieve this is to have majority of directors that are not a member of management (people
without any direct or indirect material relationship that could lead to biasness). Also, it is
essential to have a board that challenges management. Other than this, they should be educated
on the basis of the business, their duties, and the boards expectations.