Corporate Governance

What’s behind the buzz about governance? The need for governance exists anytime a group of people come together to accomplish an end. Governance relates to the processes that coordinate and control an organization’s resources and actions. Its scope includes ethics, resource-management processes, accountability and management control. But governance is a highly contextual concept: process and practices vary significantly with the environment in which they are applied. In the public sector, governance needs to take into account legal and constitutional accountability and responsibilities. Representing stakeholder interests may be a determining factor in the governance to be applied in the non-governmental sector.

At the corporate level, since the 1997 Asian financial crisis, the word ‘governance’ has been applied also to broader business ethics and truthful financial reporting. It covers the mechanisms of accountability and transparency that are necessary to protect the interests of shareholders and stakeholders. Corporate disclosures beyond the minimum statutory requirement are of growing importance in today’s capital market, which is characterized by innovation, globalization and profound changes in business and capital markets.

Corporate governance and disclosure are inexorably linked research areas, in part because the financial accounting system provides important information to aid in the effective operation of corporate governance and control. Poor corporate governance oversight of the financial reporting process has been cited as attributing to many financial scandals. Research projects exploring governance and disclosure include the assessment of corporate governance at firm and country level, corporate governance mechanisms, governance in public sector, corporate voluntary disclosures and performance.

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