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Corporate Governance * Corporate governance broadly refers to the mechanisms, processes and relations by which corporations are controlled and directed. * Corporate governance is the system of principles, policies, procedures, and clearly defined responsibilities and accountabilities used by stakeholders to overcome the conflicts of interest inherent in the corporate form. * Corporate governance is concerned primarily with protecting weak and widely dispersed shareholders against self-interested Directors and Managers.
Shareholders and Stakeholders: Shareholders are stakeholders in a corporation, but stakeholders are not always shareholders. A shareholder owns part of a company through stock ownership, while a stakeholder is interested in the performance of a company for reasons other than just stock appreciation. Stakeholder for example employees, suppliers, customers…
Directors: Guardians of the company’s assets for the shareholders. The boards of directors are an intermediary between the shareholders and management, and represent shareholders’ interests by: monitoring managers, approving strategies and policies.
Managers: who use the company’s asset. Managers may be more interested in expanding the size of the business, bonuses based on earnings, taking on excessive risks, or job security.
The objectives of a corporate governance system are (1) to eliminate or mitigate conflicts of interest among stakeholders, particularly between managers and shareholders, and (2) to ensure that the assets of the company are used efficiently and productively and in the best interests of the investors and other stakeholders. Focused on preventing corporate collapses.
Four Principles of Corporate Governance 1) Accountability The Board should communicate to the company’s shareholders and other stakeholders, at regular intervals, a fair, balanced and

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