EXPLAIN IN 500WORDS the fundamental pillars of corporate governance
There are eight fundamental pillars of Corporate Governance These are Accountability and responsibility, Ethics and integrity, Transparency, Trusteeship, Oversight, external Audit, Participation and fair treatment to all stakeholders. These 8 pillars are explained briefly in the following points:-
1. Ethics and Integrity:
Ethical principles must be used by an organisation. If ethical values are not followed by the corporation than it may lead to compromise the corporate culture and the interest of stakeholders in a negative way.
2. Transparency:
There should be proper transperancy on the classification of corporate strategies, financial statements and policies to its all stakeholders
Transparency leads to effective reporting without compromising the interests of its stakeholders
3. Accountability and responsibility:
Top level Management is accountable and liable to the shareholders and the Management Board and shareholders are liable to the Management Board it helps the corporation to effectively accomplish it's commitments and helps in the growth of the company
4. Trusteeship:
It means that the board of directors is a trusteeship concept, which are the protectors of shareholders and stakeholders interests in the company and to enhance their trust through maintaining and working on areas where there interests are vested.
5. Empowerment:
There should be equality with respect to opportunities in the corporation. This actually confers decision-making powers at the most important organizational level to stimulate innovations and creativity within the company. Providing empowerment helps the corporation to inject innovative ideas in the corporation
6. Fair treatment to all the stakeholders:
It means that there should be an equal treatment of all the stakeholders whose interests are vested in the company.
7. Oversight:
This means that there should is a checks and balances program exists. It will avoid abuse of power and make the management more effective and responsible towards its decisions. This Pillar is critical towards goods corporate governance as the top level management decisions are very important for the corporation in the long run.
8. External Audit:
There must be independent external Audit on the working and management of the organisation. It helps to gain trust of the stakeholders whose interests are vested in the good working of the organisation.
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