Key Principles of Corporate Governance Essay Example | Topics and Well Written Essays - 1500 words

Key Principles of Corporate Governance - Essay Example The role of corporate governance has, therefore, become increasingly vital to the strategic management of the organization and projection of its aims and objectives in the eyes of the public and other stakeholders. Corporate governance can be broadly defined as the creation of business environment within and outside the organization that would effectively meet the challenges of the time and improve and improvise the productivity of the performance outcome. The lack of effective controls vis-Ã  -vis malpractices in accounts and auditing, security of confidential information, corrupt practices in the higher hierarchy of management, disparity in rules and regulation etc. have become crucial risks factors that have resulted in huge economic loss for its shareholders as well adversely affecting its credibility in the market. Hence, in the fast changing environment of globalization, business compulsions have become more stringent in their nature and factors like accountability, responsibility and reliability have become important pre-requisites for business to create a credible environment for their trade and investment. ‘Corporate governance framework should recognize the rights of stakeholders established by law or through mutual agreement..’ (Du Plessis, 2005, p.36). The key principles of corporate governance are described and ranked in order of importance as under: ‘Corporate disclosure to stakeholders is the principal means by which companies can become transparent’ (Solomon, 2007, p143). Thus, Corporate Governance promotes effective control measures to safeguard the interest of all its stakeholders, investors and business partners. Under the codes of corporate governance, the disclosure mainly relates to the policy of the company to disclose relevant information about its budgets, annual financial statements