Types of Corporate Governance
In order to protect the business interest of the stake holders, companies implement procedures and policies as a means of control. This is what corporate governance stands for. There are basically three types of corporate governance.
These will be briefly discuss in this article to aid you in the handling of the corporate matters that you need to attend for the protection and control of the business interest of your company or corporation’s business interest, whether they may be internal or external.
The Different Types
The first type of corporate governance is a set of policies and procedures that a corporation uses to control and protect the business interest whether they are internal or external. This is represented by the policies and guidelines that need to be followed by every individual in the business. This type of corporate governance is oftentimes utilized by large corporations. This is due to the fact that large corporations are complex and this type of corporate governance is a means of simplifying the complexities that entails having a large corporation. In addition to that, publicly held corporations also utilize this type of corporate governance.
Another type of corporate governance is the board of directors. The board of directors is actually a mechanism that represents the stakeholders of the company. It protects their interest in the business. Board of directors is actually composed of the stakeholders that are elected by them. The board is tasked to manage and or review the company’s overall performance and to remove individuals if necessary to enhance the company’s financial performance. The board of directors is the means employed by the stakeholders to bridge the gap between them and the company owners. The existence of the board of directors will lose its essence if a corporation or company does not have stakeholders. Board of directors may be utilized by large private organizations and corporations.
Auditing is another type of corporate governance mechanism. Basically audits are reviews of the corporation’s financial transactions. Audits ensure that the business or corporation is in concurrence to the guidelines set by the national accounting authorities. Audits also ensure that the regulations and other external guidelines are met by the corporation. Auditing is an integral tool in the gathering of information by the shareholders or investors or event the general public in their assessment of the business or corporation. Audits can help improve the corporation’s standing n the business scene. This is because business will be conducted willingly by other company if the companies they will be doing business with have a good track record.
The last type of corporate governance mechanism is the balance of power. This ensures that no one person is vested with all the controlling powers of the company. This distributes the powers to the board members, the directors and the shareholders. The roles established by this balance make sure that the company is flexible and bend with the changing times. This makes the operation of the company smoother and without interruptions to the normal operations of the company.
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