Corporate governance is a set of rules and structures that govern the activities of businesses. It entails the accountability of the board of directors and the senior managers of a company and preventing conflicts between management and shareholders by encouraging transparent communication and ensuring compliance to laws and regulations. It also encourages fairness between people who are involved in the company and helps it achieve its objectives. It is important to understand the different types of corporate governance to select the right one for your business.
Shareholders have ownership of a corporation and have rights, including the right to vote on matters and to receive information that relates to their investment and voting decisions. As therefore, they expect managers and boards to act as long-term stewards for their investments. Shareholders also expect a high degree of transparency from corporate entities.
There are a variety of models of corporate management which include the Anglo/US model, as well as the German and Japanese models. Each has a different focus and is different in the way it manages risks to business. There are various corporate governance models, as well as national variations.
The continental model includes two groups that oversee the company. The management board is composed of insiders from the company such as executives; the supervisory board is made up of outsiders such as workers’ union representatives and stockholders. The model is well-known for its emphasis on national interest and government and the corporate responsibility to serve society and contribute to it.