Business Ethics and Corporate Governance, Second Edition

WHY IS CORPORATE GOVERNANCE IMPORTANT?

Corporate governance is important for a society due to many reasons as given below:

1. It lays down the framework for creating long-term trust between companies and the external providers of capital.
2. It improves strategic thinking at the top by inducting independent directors who bring in a wealth of experience and a host of new ideas.
3. It rationalizes the management and monitoring of risks a firm faces globally.
4. It limits the liability of the top management and directors by carefully articulating the decision making process.
5. It ensures the integrity of financial reports.
6. It helps to provide a degree of confidence that is necessary for the proper funding of a market economy.