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The Important Principles of Corporate Governance

BY: S Edwin | Category: Sales-Marketing | Submitted: 2010-03-12 15:12:49
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Article Summary: "Corporate governance and the management of a company should go by following certain rules and these are the principles. Some of the important principles of corporate governance are listed here..."


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There are various principles that are involved in corporate governance. These principles should be adequately followed by the people in the leadership position in the company to make sure that the company is able to meet all the eventualities in terms of financial dealings and other dealings. The principles of corporate governance may change from one state to another depending on various internal and also external factors. In spite of these, there are a set of principles that are uniform for almost all companies and organizations.

The principles of corporate governance are as follows:

1. Adequate and timely disclosures:


Disclosures are one of the most important aspects of the work of the management. The reason for this is that the leaders of the company should disclose various important facts about the company and also about the changes that are happening in the company. There are many companies that do not disclose some of the facts that need to be disclosed. This can include negative information or positive information. Many managements try to disclose information at a time when they have personal gain. This should not be done.

2. Decision making:

The company and the leaders of the company should make the right decisions for the company to be the best. There are many companies that have great leaders who make good decisions, but the decision making in a company is not an independent decision made by a single person. Instead, the decision is made by the whole board. This makes the decision to not be the correct one for the company at times.

3. Ethical functioning:

The most important principle of corporate governance is to have an ethical functioning of the whole board. There are some companies that do not have any ethics. These companies are the ones that may seem to thrive for a short time, but in the long run they fail because they are found out and stringent measures taken by the various regulatory boards of the country. Ethical functioning is not only the responsibility of the leaders of the company according to the law, but should also be the moral responsibility of the company.

4. Protecting the value of the shareholders:

The share holders are one of the biggest groups of stake holders in the company. The reason for this is because these are the people who have the maximum money in the company and so they have a right to know all about the company. They are in fact having a ownership on the company when it is publicly listed. They should be the main aim of the company leadership. The company management should make sure that the value of the share holders is maintained.

5. Foundation:

The management should also form a strong foundation which will help the company to become better in many ways. The foundation should be very strong to make the company to grow. If the leadership is not strong, then the company itself will be weak and can falter at the first sign of trouble.

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