What is corporate governance?

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The word ‘corporate’ basically means a body that can either be public or private and is a legal entity organised based on applicable law. Once formed, it becomes a corporate citizen and enjoys independent existence from its owners, the shareholders.

The word ‘governance’ is derived from the Latin word “gubanare” which means “to steer” and in the ordinary sense; it refers to the exhibition of powers to control, direct and guide the actions and affairs of any entity in order to achieve a particular goal.

Thus corporate governance is the framework that acts as a guiding tool for the businesses that aids in the drafting of rules, policies, and guidelines that are not only just and fair for all the stakeholders but even aim at reaping profits for the corporate. Corporate governance can be defined as a group of rules, law, and voluntary private sector practices which helps companies to utilize their economic and financial resources efficiently to generate profits for its shareholders while also paying heed to the interests of stakeholders and society as a whole. The basic aim of corporate governance is to facilitate effective, entrepreneurial, and prudent management that can ensure long-term success by ameliorating a company’s image, efficiency, effectiveness, and social responsibility.

It basically encompasses aspects like accountability, transparency, independence, honesty, fairness, sustainability, ethics, stakeholder interfacing, good board practices, etc.