Knowra Corporate governance Corporate governance Corporate governance is the system of rules, practices, and processes by which a company is directed, monitored, and held accountable. It allocates authority and responsibility among shareholders, boards, managers, and other stakeholders.
Board of directors : A group elected or appointed to oversee a company’s management and represent its shareholders. The board is the central body that appoints executives, monitors performance, and sets direction.
Corporation : A legal entity separate from its owners, able to own property, enter contracts, and bear liability. Corporate governance operates within the corporation’s distinct legal identity.
Shareholder primacy : The view that a company’s primary purpose is to maximize value for its shareholders. It defines a narrow objective against which broader governance duties are debated.
Corporate scandal : A public controversy involving serious misconduct, deception, or abuse within a company. Scandals expose failures in oversight, controls, or accountability.
Fiduciary duty : A legal obligation to act loyally and carefully for another party’s interests. Directors and executives are bound by duties that constrain their use of corporate power.
Shareholder : A person or organization that owns shares in a company. Shareholders provide capital and commonly elect directors, but do not manage daily operations.
Stakeholder capitalism : An approach to business that gives weight to workers, communities, customers, and other stakeholders alongside investors. It contrasts with governance models that prioritize shareholder returns above other interests.
Enron scandal : The collapse of Enron in 2001 after accounting fraud concealed major debts and losses. Enron became a prominent case of failed board oversight and deceptive reporting.
Internal control : Policies and procedures designed to support reliable reporting, lawful conduct, and effective operations. Controls help boards and managers detect errors, misconduct, and operational risks.
Principal–agent problem : A conflict that arises when an agent can pursue interests different from those of a principal. Separation between ownership and management creates a central governance challenge.
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