Accounting Information Systems: The Processes and Controls, 2nd Edition

PARTICIPANTS IN THE CORPORATE GOVERNANCE PROCESS (STUDY OBJECTIVE 2)

Recall from the previous section that corporate governance can be defined as an elaborate system of checks and balances. Corporate governance is considered elaborate not only because it is multifunctional, but also because of the variety of people involved in the system. The participants in the corporate governance process are often referred to as stakeholders. Stakeholders are all of the different people who have some form of involvement or interest in the business. They participate in or with the business in a manner that puts them in a position of financial interest or risk, or is otherwise significant to the overall strategies and operations of the business.

Stakeholders can be internal or external. Exhibit 5-1 presents an example of the various internal and external stakeholders of a typical corporation. Each of these stakeholder groups affects, or is affected by, corporate governance. For example, management has a huge direct impact on corporate governance, while the community is likely to be more indirectly affected by corporate governance. To understand corporate governance, it is important to grasp not only who the stakeholders are, but what their functions are, relative to the organization. The stakeholder groups from Exhibit 5-1 are described next, and the section that follows these descriptions explains their functions.

Exhibit 5-1 Stakeholders as Participants in the Corporate Governance Process