- published: 05 Oct 2015
- views: 4023
Corporate governance is "the system by which companies are directed and controlled" (Cadbury Committee, 1992). It involves regulatory and market mechanisms, and the roles and relationships between a company’s management, its board, its shareholders and other [Stakeholder (corporate)|stakeholder]]s, and the goals for which the corporation is governed. In contemporary business corporations, the main external stakeholder groups are shareholders, debtholders, trade creditors, suppliers, customers and communities affected by the corporation's activities . Internal stakeholders are the board of directors, executives, and other employees.
Much of the contemporary interest in corporate governance is concerned with mitigation of the conflicts of interests between stakeholders. Ways of mitigating or preventing these conflicts of interests include the processes, customs, policies, laws, and institutions which have impact on the way a company is controlled. An important theme of corporate governance is the nature and extent of accountability of people in the business, and mechanisms that try to decrease the principal–agent problem.