Corporate governance is the system of rules, practices, and processes by which a company is directed and controlled.

Corporate Governance refers to the way in which companies are governed and to what purpose. It identifies who has power and accountability, and who makes decisions. It is, in essence, a toolkit that enables management and the board to deal more effectively with the challenges of running a company. Corporate governance ensures that businesses have appropriate decision-making processes and controls in place so that the interests of all stakeholders (shareholders, employees, suppliers, customers, and the community) are balanced.

Governance at a corporate level includes the processes through which a company’s objectives are set and pursued in the context of the social, regulatory, and market environment. It is concerned with practices and procedures for trying to make sure that a company is run in such a way that it achieves its objectives while ensuring that stakeholders can have confidence that their trust in that company is well-founded.

As the home of good governance, the Institute believes that good governance is important as it provides the infrastructure to improve the quality of the decisions made by those who manage businesses. Good quality, ethical decision-making builds sustainable businesses and enables them to create long-term value more effectively.

Author (re-post): The Chartered Governance Institute UK & Ireland.

For more information on London Business School courses on Corporate Governance run by the Leadership Insitute click here.