L2: CORPORATE GOVERNANCE

• Corporate governance is the system of rules, practices, and processes by which a company is directed and controlled
• The Board of Directors are responsible for the governance of their companies
• The purpose of corporate governance is to help build an environment of trust, transparency, and accountability necessary for fostering long-term investment, financial stability, and business integrity
• Good corporate governance creates transparent rules and controls, guides leadership, aligns interests of shareholders, directors, management, and employees, builds trust with investors and the community, gives stakeholders a clear idea of a company's direction and business integrity, facilitates raising capital, reduces potential for financial loss, waste, risks, and corruption, and is a game plan for resilience and long-term success
• Corporate governance parties include shareholders, directors (guardians of company assets for shareholders), and managers (those who use the company's assets)
• Fairness in business refers to treating people with a standard of performance that is consistent and equal based on commitments, giving customers reasonable value for their money, and equal treatment
• Examples of fairness in business:

  • A boss listening to both sides of a story before judging who is right and wrong
  • An employer giving 13th-month pay to all employees
• Accountability in business is answerability, blame worthiness, liability, and the expectation of account-giving
• Examples of accountability in business:

  • A cashier admitting losing the company's collection
  • An engineer being blamed if a project misses deadlines
  • Employee A recommending a cousin for a job, who then steals, leading to Employee A being blamed and responsible
• Transparency in business means stakeholders should be informed about the company's activities, future plans, and risks involved in its business strategies, and it involves openness and providing clear information to shareholders and stakeholders
• Ways to create transparency:

  • Be honest as transparency builds trust
  • Share results, win or lose
  • Work with people who care about transparency
• Independence in business is the ability to stand apart from inappropriate influences, be free of managerial capture, and make correct decisions on issues
• Technical skills in business encompass the ability to apply specialized knowledge or expertise
• Human skills in business involve understanding, communicating with, motivating, and supporting people individually and in groups
• Conceptual skills in business are the mental ability managers must have to analyze and diagnose complex situations
• Guardians of the company's assets for the shareholders are directors
• Corporate governance is the system by which businesses are directed and controlled by management in the best interest of shareholders
• Shareholders are those that own the company
• Managers are those who use the company's assets