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Corporate Governance: Significance of Corporate Governance for New Companies!

by Apr 18, 2018Homework Answers

The different practices and policies and processes that are used to control the different functions of a company are collectively called the corporate governance. It basically balances the requirements of the various important parts of the firm like the management, suppliers, customers, shareholders, financers, etc. It also provides a base for fulfilling the objectives of the company, so it looks after every aspect of the management, thus corporate governance is an integral part of any organization.
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The corporate governance principles
There are several principles that are involved in the governance of the corporate firms. These are as follows –

  • Giving recognition to the shareholders

The shareholders are the main part of a firm who help to maintain the price of its stocks. Generally firms do not give importance to small level shareholders, and their interests are put at stake when they are made to compete with the large scale shareholders. An ideal system should never be of this sort, instead, all the shareholders irrespective of their level should be allowed to take part in all meetings and voice their opinion as well.

  • Looking after the interests of the stakeholders

All stakeholders related to a firm should also be allowed to have equal right to voice their opinions. Especially when stakeholders who are not shareholders are given importance, and their requirements are addressed to, it always creates a positive image of the firm in front of the community. With corporate governance homework answers, you can get a better idea.

  • There should ensure transparency in a business

All dealings in a business should be done with complete transparency. When the business policies and practices are transparent, it builds trust in the firms shareholders. All data regarding records of finances, earnings, etc. should be stated clearly which will build a positive image about the firm’s authenticity.

  • There should be an ethical approach

There are firms who at times indulge in being unethical in order to gain more profits. This should be avoided completely. There should be a definite code of ethics that should be used as a guideline and followed without any deviation. Violation of ethical rules might bring quick positive results initially in relation to profits, but gradually it will lead to different issues. Corporate governance homework answers thus stress on following the code of ethics.

  • There should be clear responsibilities assigned to shareholders

All shareholders of the firm should be assigned separate responsibilities that need to be strictly followed by them. All the members should have the same vision towards the growth of the company.
Significance of corporate governance
Corporate governance is very important for the smooth functioning of a firm. They are as follows –

  • The change of structure of ownership has affected corporate governance.

Over the years, the structure of ownership of the firms has changed greatly due to the emergence of different financial institutions. These financial institutions have a huge control over the management of the company. With corporate governance homework answers, students can get a better idea.
Since these organizations provide finance to the firms, they have the power to force the management to change their policies. Thus these bodies pressurize the firm to be more accountable and transparent in its functions.

  • To change scams and frauds

Recent years have seen an immense growth in the number of fraudulent and corrupt activities. There is continuous misuse of money obtained from public. These activities can happen at any place, be it banks multinational companies, etc. Corporate governance can be used as a weapon in such cases, and such scams can be reduced.

  • Helps in maintaining social responsibility

Maintaining social responsibility helps in improving the image of a company. A company that follows corporate governance has more trust from its customers and shareholders which in turn help in the growth of the firm. Trust being the biggest asset of a firm, this aspect of a business is thus necessary.
In today’s world where the generation always carries out so much of research about every aspect, customers have become much more cautious, and presence of these governing rules can only act positive.

  • Helps in promoting globalization

Most firms today are working on a global platform, with the advent of the internet and online shopping becoming popular day by day, globalization is becoming an important aspect. It becomes difficult for firms to attract investors and customers globally. Manuals as corporate governance homework answers are of real help.
The presence of corporate governance is the only key that can help in getting the trust of customers all over the globe. In the absence of corporate governance, it will become impossible for firms to enter and survive in the global market.

  • Helps in mergers and takeovers

There are a huge number of mergers and takeovers in business today, and the presence of corporate governance helps a lot during such activities. Such mergers have to be done with numerous documentations and declarations, at such occasions, presence of governing policies prove to be a boon as there are predetermined rules that behave as guidelines to be followed at times of such mergers.
Corporate governance is the foremost important aspect for a company. If it is executed properly then all kinds of scandals, scams or frauds can be easily avoided. Presence of this aspect makes the company more trustworthy.
Be it the customers or the shareholders, presence of this governance instills faith in them as they know that the company has clear governing policies that the firm follows and there cannot be any deviation from such policies. A company without such policies cannot be trusted by shareholders especially in today’s world that is filled with several scams and frauds. With corporate governance homework answers, you will also get better ideas.