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Types of Corporate Governance

Corporate governance is a field that is a complex area of ethics, policy and practice that involves various stakeholders. It includes the structures and systems that ensure accountability, transparency and transparency in the company’s operations and reports. It encompasses the method by which boards oversee the executive management of a company and how they select to monitor and evaluate the CEO’s performance. It also encompasses the manner directors make financial decisions, and how they inform shareholders of these decisions.

In the 1990s, corporate governance was an issue of great interest due to the implementation of structural reforms to build markets in former Soviet states and the Asian Financial Crisis. The Enron scandal of 2002, followed by the emergence of shareholder activism within institutions, and the financial crisis of 2008, increased scrutiny. Corporate governance remains an ongoing topic, with new pressures and innovations constantly emerging.

The dominant school of thought, known as the “shareholder primacy” view or Anglo-Saxon method, places a higher priority on shareholders. Shareholders select the board of directors who direct management and sets the strategic goals for the company. The board is responsible for selecting and reviewing the CEO, setting and evaluating enterprise risk management policies, directing the operations of the company and submitting reports to shareholders on their management.

Integrity honesty, transparency, fairness and accountability are the four core principles of effective corporate governance. Integrity is a reflection of the ethical and responsible way in which board members make decisions. Transparency means openness and honesty as well as complete disclosure of important information to all stakeholders. Fairness is a factor in how boards treat their employees, suppliers and customers. Responsibility relates to how the board treats its own members and the community as a whole.

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