Business Sustainability, Corporate Governance, and Organizational Ethics

CHAPTER 11An Introduction to Corporate Governance

1. Introduction

Corporations with entrepreneurial spirit are the main engines that drive a nation’s economy and its capital markets to long-term sustainable prosperity. Corporations’ sustainable performance and financial information contribute to the safety, integrity, and efficiency of the capital markets. Public companies usually rely on public sources of funding through issuing stocks. For this open financial system to function effectively there should be an appropriate system of checks and balances, namely an effective corporate governance structure. Many initiatives and developments during the past several decades have shaped corporate governance. The early developments underscored the need to ensure that management acts in the sustainable well-being of the company and its shareholders. Developments in the late 1990s and the early 2000s reinvigorated interest in, and focus on, effective corporate governance to protect shareholders and other stakeholders (e.g. employees, creditors, and customers) from managerial misconduct and corporate malfeasance.

Corporate governance has evolved as a central issue for public companies in the aftermath of the 2007–2009 global financial crisis. Global business organizations have recently undergone a series of corporate governance reforms, aimed at improving their governance and financial reports. Effective corporate governance is intended to improve strategic, operational, and financial ...