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. Stakeholder

    A party that has an interest in an enterprise or project. The ...
  3. Corporate Kleptocracy

    Buzzword that describes the greed of corporate executives who ...
  4. Shareholders' Agreement

    An arrangement among a company's shareholders describing how ...
  5. Corporate Governance Quotient - ...

    A metric developed by Institutional Shareholder Services (ISS) ...
  6. Best Practices

    A set of guidelines, ethics or ideas that represent the most ...
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. Effective Annual Interest Rate

    An investment's annual rate of interest when compounding occurs more often than once a year. Calculated as the following: ...
  2. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
  3. Odious Debt

    Money borrowed by one country from another country and then misappropriated by national rulers. A nation's debt becomes odious ...
  4. Takeover

    A corporate action where an acquiring company makes a bid for an acquiree. If the target company is publicly traded, the ...
  5. Harvest Strategy

    A strategy in which investment in a particular line of business is reduced or eliminated because the revenue brought in by ...
  6. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
Trading Center