Corporate Governance

AAA

DEFINITION of 'Corporate Governance'

The system of rules, practices and processes by which a company is directed and controlled. Corporate governance essentially involves balancing the interests of the many stakeholders in a company - these include its shareholders, management, customers, suppliers, financiers, government and the community. Since corporate governance also provides the framework for attaining a company's objectives, it encompasses practically every sphere of management, from action plans and internal controls to performance measurement and corporate disclosure.

INVESTOPEDIA EXPLAINS 'Corporate Governance'

Corporate governance became a pressing issue following the 2002 introduction of the Sarbanes-Oxley Act in the U.S., which was ushered in to restore public confidence in companies and markets after accounting fraud bankrupted high-profile companies such as Enron and WorldCom.

Most companies strive to have a high level of corporate governance. These days, it is not enough for a company to merely be profitable; it also needs to demonstrate good corporate citizenship through environmental awareness, ethical behavior and sound corporate governance practices.

RELATED TERMS
  1. Checks And Balances

    The various procedures set in place to reduce mistakes or improper ...
  2. Internal Audit

    The examination, monitoring and analysis of activities related ...
  3. Proxy

    1. An agent legally authorized to act on behalf of another party. ...
  4. Sarbanes-Oxley Act Of 2002 - SOX

    An act passed by U.S. Congress in 2002 to protect investors from ...
  5. Stock Compensation

    A way corporations use stock options to reward employees. Stock ...
  6. Stakeholder

    A party that has an interest in an enterprise or project. The ...
Related Articles
  1. The Basics Of Corporate Structure
    Investing Basics

    The Basics Of Corporate Structure

  2. What Does Your Mutual Fund Say About ...
    Mutual Funds & ETFs

    What Does Your Mutual Fund Say About ...

  3. Proxy Voting Gives Fund Shareholders ...
    Mutual Funds & ETFs

    Proxy Voting Gives Fund Shareholders ...

  4. Governance Pays
    Options & Futures

    Governance Pays

comments powered by Disqus
Hot Definitions
  1. Correlation

    In the world of finance, a statistical measure of how two securities move in relation to each other. Correlations are used ...
  2. Letter Of Credit

    A letter from a bank guaranteeing that a buyer's payment to a seller will be received on time and for the correct amount. ...
  3. Due Diligence - DD

    1. An investigation or audit of a potential investment. Due diligence serves to confirm all material facts in regards to ...
  4. Certificate Of Deposit - CD

    A savings certificate entitling the bearer to receive interest. A CD bears a maturity date, a specified fixed interest rate ...
  5. Days Sales Of Inventory - DSI

    A financial measure of a company's performance that gives investors an idea of how long it takes a company to turn its inventory ...
  6. Accounts Payable - AP

    An accounting entry that represents an entity's obligation to pay off a short-term debt to its creditors. The accounts payable ...
Trading Center