Corporate Governance is defined as a structure for determining organizational objectives and monitoring performance to ensure that business objectives are attained. Corporate Governance became a dominant business topic in the wake of many corporate scandals – Enron, WorldCom and Tyco, and is becoming increasingly popular today in the wake of the TJX credit card breach case. Companies generating interest in corporate governance is not new, but the severity of the financial impacts of the many scandals undermined the confidence of the investment community and corporate stakeholders.
Good corporate governance is important to investors and shareholders. As a matter of fact, many investors, before making an investment decision, validate and rank the company’s corporate governance on par with its financial indicators. As a matter of fact, some investment firms are prepared to pay large premiums for investments in companies with high governance standards.
While there is no single model of good corporate governance, in many countries, corporate governance is vested in a supervisory board that is responsible for protecting the rights of the shareholders and stakeholders. The board, in turn, works with a senior management team to implement governance principles that ensure the effectiveness of organizational processes.