Corporate governance is needed to create a corporate culture of transparency, accountability and disclosure. It refers to compliance with all the moral and ethical values, legal framework and voluntary adopted practices. This enhances customer satisfaction, shareholder value and wealth.
- CORPORATE PERFORMANCE:
Improved governance structure and processes ensure quality decision-making, encourage effective succession planning for senior management and enhance the long-term prosperity of companies, company remains independent and its sources of finance. This can be linked with improved corporate performance either in terms of share price or profitability.
- ENHANCE INVESTOR TRUST:
Investors consider corporate governance as important as financial performance when evaluating companies for investment. Investors are likely to invest openly in those companies which have high levels of disclosure and transparency. The consulting firm McKInsey surveyed that global institutional investors are prepared to pay a premium of up to 40 percent for shares of companies with superior corporate governance practices.
- BETTER ACCESS TO GLOBAL MARKET:
Good Corporate governance systems attract investments from global investors, which subsequently lead to greater efficiencies in the financial sector.
- COMBATING CORRUPTION:
Companies that are transparent, and have sound system that provide full disclosure of accounting and auditing procedures, allow transparency in all business transactions, provide environment where corruption will certainly fade out. Corporate governance enables a corporation to compete more efficiently, slow down corruption process and prevent fraud and malpractices in the organisation.
- EASY FINANCE FROM INSTITUTIONS:
Evidence indicates that well-governed companies command goodwill in the market. The credit worthiness of a company can be trusted on the basis of corporate governance practices in the company. It is easier for well-governed companies to raise finance from various institutions.
- ENHANCING ENTERPRISE VALUATION:
Improved management and accountability and operational transparency fulfil investors’ expectations and confidence on management and corporations and returns, there by increase in the value of corporations.
- REDUCED RISK OF CORPORATE CRISIS AND SCANDALS:
Effective corporate governance ensures efficient risk mitigation system in place. The transparent and accountable system that corporate governance makes the Board of company aware of all the risks involved in particular strategy thereby, placing various control systems to monitor the related issues.
INVESTOR RELATIONS ARE ESSENTIAL PART OF GOOD CORPORATE GOVERNANCE. INVESTORS have entrusted management of the company for creating the enhanced value for their investment. The company is hence obliged to make timely disclosures on regular basis on all its shareholders in order to maintain good investors’ relation. Good corporate governance practices create the environment where Boards cannot ignore their accountability to the shareholders.