Corporate governance refers to the formally established guidelines that determine how a company is run. The company’s board of directors approves and periodically reviews the guidelines, which must align with the company’s direction, performance and regulatory practices.Corporate governance guidelines serve a company in a similar way to the constitution of the United States serving the USA. Corporate governance specifies the rights and responsibilities of company stakeholders, with particular emphasis on three groups: Shareholders who own the company The board of directors who oversee the managers And management which runs the daily operations A key function of corporate governance is to determine how power is distributed between these groups to ensure that the company runs fairly and optimally for all. It may also specify the rights of other stakeholders, such as employees, customers, creditors and suppliers. Corporate governance became a very important issue in 2002, with the passing of the Sarbanes Oxley Act. It sought to restore public confidence in corporate governance following the collapse of several major companies, due to accounting fraud, such as Enron and WorldCom. Corporate governance continues to be a hot topic today with the rising interest in corporate ethics. For example, one such issue is whether corporations’ should take responsibility beyond their direct shareholder interests, to include the communities they serve and environmental issues.