Corporate governance is a set of rules and structures that regulate the operations of businesses. It encompasses the accountability of a company’s board directors and the senior management and avoiding conflicts of interest between management and shareholders as well as promoting transparency and making sure that all the laws and regulations. It also encourages fairness between all stakeholders and helps the business achieve its goals. It is important to understand the various forms of corporate governance in order to choose the appropriate one for your company.
Shareholders are the owners of a corporation and have the right to vote on issues and receiving information material to their voting and investment decisions. As as such, they expect managers and boards to be long-term stewards of their investment. Shareholders expect a high degree of transparency from their companies.
There are a myriad of models of corporate management, including the Anglo/US model as well as the German and Japanese models. Each model has a different emphasis, and each handles risks to business in a different way. Apart from different models, there are also various national specifics in corporate governance.
The continental model is a two-group control system. The management board is comprised by insiders from the company such as executives, whereas the supervisory board is comprised of outsiders such as stockholders or labor union representatives. The model is well-known for its focus on national interest and government and the company’s obligation to serve society and contribute to it.