The term ‘corporate governance’ refers to the processes, mechanisms and relations used to control and direct corporations. The governance structures and principles indicate the rights and responsibilities among different people within the corporations, as well as point out the rules and processes to take decisions in a corporate context.
The term ‘corporate governance’ indicates also all the processes at the base of the corporations’ goals and pursued in a social and market environment. Governance methodologies include monitoring the actions, practices and policies within the corporations, as well as control the decisions of both agents and stakeholders.
In modern time, corporate governance refers to principles which firstly appeared in three documents published during the 1990s. These principles include:
The rights and equitable treatment of shareholders- meaning that organisations should respect and help shareholders to exercise their rights by communicating information and offering them to participate in general meetings.
Interests of other stakeholders- meaning that companies should recognise that they have legal, social and contractual obligations to non-shareholder stakeholders (e.g. employees, creditors, suppliers and local communities).
Role and responsibilities of the board- meaning that the organisation board need to have relevant skills as well as understand the review and challenges of the management performance.
Integrity and ethical behaviour- meaning that corporate officers and board member have to show integrity.
Disclosure and transparency- meaning that every organisation should clarify the roles and responsibilities of the board and management to provide stakeholders with the necessary information.
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