Corporate governance is the system by whuch and organization makes its decisions, it includes the processes, the practices, the rules on how the organization decides and who decides. The board of directors is part of the corporate governance system of the organization. Its focus includes the monitering of management. ISO26000 defines governance and also guidance on what constitutes good governance.

Corporate governance is a systematic approach defining the decision and control machanisms of organizartions in order to secure balanced interests of shareholders such as management, workers, customers, suppliers, financiers, government, environment and the community.

Corporate governance has gained attention after the Sarbanes-Oxley Act in the U.S., which was promoted in order to restore public confidence in companies and markets after fraud bankrupcy of high-profile companies such as Enron and WorldCom.

Thanks for your answers. This is a subject I have recently become interested in.

According to the above, corporate governance has to do with the internal decision making and communication structures that emanate from the hierarchy. From customer to frontline employee through a vertical and horizontal function-based organizational structure, all the way up to the CEO or chair of the BOD; does corporate governance occur? If the governance system is clear, than everybody should know exactly who to go to (for a decision) when a given event arises? In addition, governance must incorporate levels of discretion, functional boundaries and is connected to organizational justice, culture, values and strategic objectives?

Does this make sense?

Muhammad, thank you for your answer.

So accountability is a big part of governance? Internal control?

In your experience, who is the monitors the capital investment and who is that individual accountable to. As for the borrowing company, I imagine the CFO and CEO are responsible. Is that correct?

Do you have any experience in this area?

Corporate Governance is a multidimensional issue. One aspect is providing fair return to the owners / shareholders, which is economic aspect that takes care of return on owners' / shareholders' investments. Other aspects take care of other stake holders' expectations. Government expects corporate to govern legally and ethically. Society expects corporate to be socially responsible entity which takes care of society and environment. Corporate governance is the responsibility of the top management team headed by CEO. Board Of Directors must oversee and ensure good corporate governance which encompasses risk management, corporate ethics and corporate social responsibility.

Thank you Mr. Dattagupta.

I have not done any personal research, but I think I will explore some of the theories in this area.

Daryn

Muhammad is right in makng the distinction between the management team and the BOD. As for corporate social responsibility, it is also part of the responsibility of the BOD and thus of corporate governance. Even though there is resistence, if one looks at major corporations, one finds CSR. Governance must also manage risk, and managing risk involves managing stakeholders expectations and therefore interactions with these stakeholders. Therefore, corporate governance does look towards providing a fair return to investors, and to do so, it must look at what outside the organization could impact this return and stakeholders, sustainability issues are some of the elements that could have a negative impact on the value of the organization.

Actually Corporate Governance is practice which came in limelight after the recommendations of Sir Adrian Cadbury.

Corporate governance is a central and dynamic aspect of business. The term 'governance' derives from the Latin gubemare, meaning 'to steer', usually applying to the steering of a ship, which implies that corporate governance involves the function of direction rather than control.

Corporate governance is a system by which business corporations are monitored, managed, directed and controlled.

It defines and confines the rights and responsibilities of the constituents of the corporate like boards, managers, shareholders and other stakeholders.

It also lays down the rules and procedures for making decisions on corporate affairs. It helps in making organizations more efficient by the use of institutional structures such as contracts, organizational designs and legislation.

for more details you may refer

Fernando (2006) Corporate Governance: Principal Policies & Practices- Pearson Education

Corporate Governance has multifeceted dimension in the organization. It basically deals with the relationships between \board, Management , shareholders and the stakeholders. Major components include the rules and regulations for organizational efficiency, defined roles and responsibiities for the board and management, risk management, ethics, internal audit and control.

Regarding to Binod Atreya speak, in developing countries like Brazil, most of agency conflict on firms are between the firm controller and the minority shareholders... because of ownership concentration, most of CG actions should be different from default actions observed in developed countries. Here, about 70% of directors of firms on capital market, although they are external, are elected by the controller.. we have had some CG problems in banks in the last years and their boards have had responsibility on these problems according CVM (like SEC on USA).

Mr. Brugni,

Your example sounds like a parliament.

What kind of issues are typically discussed between the BOD and upper management? Does the BOD role go beyond monitoring and control or can they involve themselves in operations? In terms of governance, what laws typically are involved?

Does anyone have any good examples?

Mr. Dyer,

BODs (directors) here do not involve themselves in operations... but on they structure we can find directors being CEO at the same time.. and, in most of time, directors are elected by the controlling shareholder (even being independent director or not).

We have the corporate act law 6.404/1976, but we don´t have much regulations in law (although we need, because of our code law characteristics). We have the IBGC (a kind of autonomous firm that issue best practices to be followed by firms).. In our Capital Market, we have three special segments of corporate governance (created in 2000 to improve the reliability of the investors)... Any firm can issue securities on these special segments, since they follow some rules of CVM (like SEC in USA)..

Specially regarding to my example of bad governance, CVM fined firms because it understood that BOD should knows about fraudulent actions..

Mainstream traditional Company Law doctrine tend to state that Corporations must be managed to promote shareholders’ rights. Activities in favour of non-shareholder constituencies such as suppliers, consumers, employees or the Community at large can be perceived as a means of Management to increase its power and personal prestige. It is further argued that it is essential to achieve a wide consensus on how to control Management actions in support of Stakeholders interests, even in Socially responsably minded Corporations. See this paper.- Elena

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2302532

Another example of Corporate Governance is Business Process Governance. Process Owners oversee cross functional and cross departmental business processes and manage them towards the result of value for a client. Process Owners are often supported by top executive process sponsors to solve conflicts with functional managers. Operationally they are supported through process stewards who are close to the functional operations. The resulting governance processes are part of the larger "Process of Process Management".

Interesting this process management comment (Mathias) Would you have a paper on it? Thanks

Glad to hear that you are interested in the Process of Process Management. I will send you a paper in a separate e-mail. The topic is discussed in detail in chapter 3 of my last book "Value-driven Business Process Management", the governance aspect in chapter 6.

I have also expanded the research in that field. Result is a comprehensive framework for the PoPM (BPM-D Framework) that is currently patent pending. Will have a new paper out soon.

Thanks.

Directors are nominated or elected by the shareholders either by votes or by consensus . Problems of corporate governance emerge due to director behaviour, inside trading , lack of internal control, lack of supervision ,or through ignorance on the part of directors . Experience suggests that intentional violation of corporate governance principles and practices for the sake of power and profit undermine the issues of CG. Therefore, regulators often issues principles and directives , monitor and supervise , and try yo ensure sound CG principles .

Hi Binod, What you point at are the bases for anglo saxon and American CG. It is also the bases for what we in EU learn. However, from a comparative perspective, other VERY relevant CG conflicts derive not so much from the agency (Shareholders/Directors) but, block shareholders or majority shareholders (empowered to nominate directors, therefore) versus minorities. And this CG issue is relevant both in SME as in listed ones (most EU countries, Japan...)

http://wwwefperezcarrillo.blogspot.com.es/

Mrs. Elena, in brazil, most of firms are controlled by families, individuals or government... So, the agency conflict here is dominated by controllers x minority shareholders. More than 75% of all directors here are indicated by controllers (including independents one).

Talles, many thanks for the information. In many EU countries the situation is similar. Listed companies would frequently be less controlled by the inner group, but we also have extensive block shareholders. Germany, norther Europe (ie Swden also tend to follow that model, generally speaking). However, as the "so called" CG movement was initiated in USA, its theories are often related to the Directorv Shareholders conflics. Modern scholars take a wider view.

I agree

Dear Daryn,

Regarding  a general analysis of corporate governance mechanisms at place against international best practice, please feel free to refer to my research paper: "Case Study: Analysis of Corporate Governance and Management Control at Kendallville Bank": https://www.researchgate.net/publication/306515523_Case_Study_Analysis_of_Corporate_Governance_and_Management_Control_at_Kendallville_Bank

It was published in the International Journal of Applied Economic Studies Vol. 4, Issue 3, pp. 14-20 and thus can be used for referencing.

Paul

Article Case Study: Analysis of Corporate Governance and Management ...

@Daryn Dyer,did you get a response on examples of corporate governance practices? I am doing my research on corporate governance practices and can't seem to get the examples either.