This document provides an overview of corporate governance principles and objectives. It defines corporate governance as the system of rules and processes by which companies are directed and controlled, with the goal of balancing interests among stakeholders. The key principles of effective corporate governance outlined are transparency and full disclosure, accountability, and corporate control. The objectives of corporate governance include fair treatment of shareholders, self-assessment, increasing shareholder wealth, and transparency.
This document provides an overview of corporate governance principles and objectives. It defines corporate governance as the system of rules and processes by which companies are directed and controlled, with the goal of balancing interests among stakeholders. The key principles of effective corporate governance outlined are transparency and full disclosure, accountability, and corporate control. The objectives of corporate governance include fair treatment of shareholders, self-assessment, increasing shareholder wealth, and transparency.
This document provides an overview of corporate governance principles and objectives. It defines corporate governance as the system of rules and processes by which companies are directed and controlled, with the goal of balancing interests among stakeholders. The key principles of effective corporate governance outlined are transparency and full disclosure, accountability, and corporate control. The objectives of corporate governance include fair treatment of shareholders, self-assessment, increasing shareholder wealth, and transparency.
This document provides an overview of corporate governance principles and objectives. It defines corporate governance as the system of rules and processes by which companies are directed and controlled, with the goal of balancing interests among stakeholders. The key principles of effective corporate governance outlined are transparency and full disclosure, accountability, and corporate control. The objectives of corporate governance include fair treatment of shareholders, self-assessment, increasing shareholder wealth, and transparency.
UNIT I – INTRODUCTION TO THE ACCOUNTANCY PROFESSION AND ASSURANCE SERVICES
Big Picture
Week 1 – 3 Unit Learning Outcomes:
a. Describe the principles of effective corporate governance. b. Understand the relationship between shareholders or owners and other stakeholders. c. Know the corporate governance code in the Philippines.
Big Picture Focus: ULOa. Describe the principles of effective corporate governance.
Metalanguage
• Governance – the process of decision-making and the process which decisions are implemented (or not implemented) through the exercise of power or authority by leaders of the country and/or organizations. • Corporate governance – the system of rules, practices and processes by which business corporations are directed and controlled. It basically involves balancing the interests of a company’s many stakeholders, such as shareholders, management, customers, etc.
Essential Knowledge
A. Purpose of Corporate Governance
The purpose of corporate governance is to facilitate effective, entrepreneurial and prudent
management that can deliver long-term success of the company. The fundamental aim of corporate governance is to enhance shareholders’ value and protect the interest of other stakeholders by improving the corporate performance and accountability. It is also about what the board of directors of a company does, how it sets the values of the business firm.
In addition, corporate governance aims to maximize the organization’s long-term success,
creating sustainable value for its shareholders, stakeholders and the nation.
B. Objectives of corporate governance
The following are the basic objectives of corporate governance:
1. Fair and equitable treatment of shareholders
A corporate governance structure ensures equitable and fair treatment of all shareholders of the company. In some organizations, a group of high net-worth individual and institution who have a substantial proportion of their portfolios invested in the company, remain active through occupation of top-level positions that enable them to guard their interest. However, all shareholders deserve equitable treatment and this equity is safeguarded by a good governance structure in any organization. 2. Self-assessment
Corporate governance enables firms to assess their behavior and actions before they are scrutinized by regulatory agencies. Business establishments with a strong corporate governance system are better able to limit exposure to regulatory risks and fines. An active and independent board can successfully point out deficiencies or loopholes in the company and help solve issues internally on a timely basis.
3. Increase in shareholders’ wealth
Another corporate governance’s main objective is to protect the long-term interest of the shareholders. Firms with strong corporate governance structure are seen to have higher valuation attached to their shares by businessmen. This only reflects the positive perception that good corporate governance induces potential investors to decide to invest in a company.
4. Transparency and full disclosure
Good corporate governance aims at ensuring a higher degree of transparency in an
organization by encouraging full disclosure of transactions in the company accounts.
C. Basic principles of effective corporate governance
Transparency and full disclosure
• Does the board meet the information needs of investment communities?
• Does it safeguard integrity in financial reporting? • Does the board have sound disclosure policies and practices? o Does it make timely and balanced disclosure? o Can an outsider meaningfully analyze the organization’s actions and performance?
Accountability
• Does the board clarify its role and that of management?
o Does it promote objective, ethical and responsible decision making? o Does it lay solid foundation for management oversight? o Does the composition mix of board membership ensure an appropriate range and mix of expertise, diversity, knowledge and added value? o Is the organization’s senior official committed to widely accepted standards of correct and proper behavior?
Corporate control
• Has the board built long-term sustainable growth in shareholders’ value for the corporation? • Does it create environment to take risk? o Does it encourage enhanced performance? o Does it recognize and manage risk? o Does it renumerate fairly and responsibly? o Does it recognize the legitimate interests of stakeholders? o Are conflicts of interest avoided such that the organization’s best interest prevail at all times?
