What Is Corporate Governance?


Quick Answer

Corporate governance refers to actions taken by organizations to improve relationships and interactions with others, including consumers, stakeholders and business partners, such as engaging in community activities and promoting good environmental practices. Corporate governance includes a set of rules, procedures and operational structure that guides the short-term and long-term actions of companies. These actions include establishing codes of conduct for employees and balancing the interests of all stakeholders.

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Full Answer

Corporate governance exists in organizations of all sizes, ranging from small companies to multinational firms. It sets a structure for internal operations as well as external affairs. Corporate governance impacts behavior and conduct at all levels of organizational operations, making it a key device for guiding actions of interns, entry-level workers, managers and CEOs in different departments. Corporate governance outlines policies and practices designed to balance the needs and interests of all stakeholders, including management, customers, government, financing organizations and the broader community. In addition to guiding the actions and behaviors of employees and behind-the-scenes operations, corporate governance establishes a public image. Most companies strive for high levels of corporate governance, which includes efforts to improve community relationships and engage in environmentally-sound practices. These organizations express good corporate citizenship, including providing transparency into their operations and promoting ethical practices.

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