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There is no single, accepted definition of corporate governance.

Corporate governance as a
specific discipline is relatively new, although the concept has been around for centuries. As
beauty "lies in the eyes of the beholder", so does the answer to the question, "What exactly is
corporate governance?"
The Organization for Economic Co-operation and Development (OECD) explains corporate
governance as:
"The system by which business corporations are directed and controlled. The corporate
governance structure specifies the distribution of rights and responsibilities among different
participants* in the corporation 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."
"Corporate governance is concerned with holding the balance between economic and social
goals and between individual and communal goals the aim is to align as nearly as possible the
interests of individuals, corporations and society."Cadbury, World Bank report, 1999
"Corporate governance is the system by which companies are directed and managed. It
influences how the objectives of the company are set and achieved, how risk is monitored and
assessed, and how performance is optimised. Good corporate governance structures encourage
companies to create value (through entrepreneurism, innovation, development and exploration)
and provide accountability and control systems commensurate with the risks involved."

Key Underpinning Concepts of CG

2.3.1 Fairness
the systems and values in the company must be balanced in taking into account all those that
have an interest in the company and its future.
there should be equality and even-handedness in directors' deliberations with the ability to
reach an equitable judgments in any given ethical situation.
The rights of various groups (stakeholders) have to be acknowledged and respected. For
example, minority shareowner interests must receive equal consideration to those of the
dominant shareowner(s).
2.3.2 Openness/ Transparency
The ease with which stakeholders are able to make meaningful analysis of a company's
actions, its economic fundamentals and the non-financial aspects pertinent to that business.*
A measure of how good management is at making necessary information available in a
candid, accurate and timely mannernot only the statutory and listing disclosures required in
financial statements, but also general reports (e.g. to financial institutions), press releases,

sustainability reports, general corporate social responsibility (CSR) reporting and other voluntary
information (e.g. through integrated reporting).
Includes management developing the appropriate culture in the company at all levels,
strategic and operational.
reflects whether investors and other stakeholders obtain a true picture of what is happening
inside the company.
Strong controls and systems have to be in place to be able to capture, analyse and present
reliable information on a timely basis to facilitate the appropriate level of openness and
2.3.3 Innovation
Innovation "the process through which economic and social value is extracted from
knowledge through the generation, development, and implementation of ideas to produce new or
improved strategies, capabilities, products, services, or processes." The Conference Board of
"Good corporate governance structures encourage companies to create value through
entrepreneurism, innovation, development and exploration"
2.3.4 Scepticism
Professional scepticism in audit terms, it is an attitude that includes a questioning mind, being
alert to conditions which may indicate possible misstatement due to error or fraud and a critical
assessment of audit evidence.
In corporate governance, and in many other applications, scepticism requires a questioning mind,
being alert for possible errors and a critical assessment of facts and evidence.
One key element of good corporate governance is the oversight role applied by non-executive
directors and shareholders (especially institutional shareholders). For example, under the Code,
non-executive directors should constructively challenge and help develop proposals on strategy.
To do so requires appropriate levels of scepticism.
As an underpinning concept, scepticism is, perhaps, unique in that it can also play a role in other
underpinning concepts.
For example, application of healthy scepticism may assist the development of fairness, openness
and transparency, independence, probity and honesty, integrity and judgement within the entity
(e.g. challenging any system within the entity that may not appear to be fair to diversity or could
result in a reduction of transparency relating to a particular transaction).
2.3.5 Independence
The extent to which mechanisms have been put in place to minimize, or avoid, potential
conflicts of interest that may exist. Examples:

Separation of the roles of chief executive and chairman of the board;

independent non-executive directors (NEDs) to represent the interest of the shareholders and
other stakeholders;
Independent NEDs balance on appointment and remuneration committees to counter potential
abuse by executive directors;
Use of internal and external auditors reporting to audit committees; and
audit committees and limitation of non-audit work.
the decisions made and internal processes established should be objective and not allow for
undue influences or overt personal motivation to prevail. That is, the company should be run for
the benefit of all stakeholders (shareholders being a primary grouping).
2.3.6 Probity and Honesty
this is fundamental to corporate governance systems (regardless of their origin) involving
integrity, honour, virtue and fair dealing.
it implies not misleading stakeholders (e.g. shareholders, the market, employees). At a higher
level, the chief executive provides all appropriate information to fellow executive directors and
2.3.7 Responsibility
Responsibility pertains to behaviour that allows for corrective action and for penalising
mismanagement. It is a willingness by management to accept liability for the outcome of
governance decisions.*
Responsible management would, when necessary, put in place what it would take to set the
company on the right path no matter how painful (e.g. dismissing an underperforming chief
executive) or against its own interests (e.g. the chief executive realising that it is time to step
while the board is ultimately accountable to the company's shareholders, recent corporate
governance development means that the board must act responsively to, and with responsibility
toward, all stakeholders of the company.
With regard to shareholders, it is argued that they have responsibilities as owners. That is, to
use the available mechanisms (e.g. annual general meetings and voting) to query and assess the
actions of management.*
2.3.8 Accountability
Individuals or groups in a company who make decisions and take actions on specific issues
need to be accountable for their decisions and actions.*

Accountability is a two-way processdirectors must provide the necessary information (e.g.

through annual financial statements) and opportunities to shareholders (e.g. annual general
meeting or specific meetings with institutional investors) to be able to hold the directors
accountable for their actions.