In most cases, corporate governance gives a clear guideline on how a company’s system is directed and controlled. Corporate governance entails a set of relationships that are evident between a company’s board, management, shareholders and other stakeholders as a way of enhancing success. As a result, the structure gives a guideline on how the objectives of the company are set, attained and monitored to achieve higher performance levels within an organization. Considerably, most organizations have clear set standards and structures of corporate governance that are used to achieve success in the daily operations.
In most organizations, adherence to corporate governance system allows for systematic control of problems that are affiliated with the separation of ownership and control. More so, corporate governance focuses on attainment of transparent disclosure of information, good board practices, clearly defined shareholders rights, efficient control processes and board commitment. As a result, good corporate governance seeks to lead to a culture of sound business ethics with good relationships between employees, shareholders and executive management (Tarantino, 2008). For example, the U.S corporate governance system allows for less monitoring from directors as the corporate governance control allows direct shareholder involvement. Therefore, significant distance is maintained between the investors and management that allows for accessibility to timely and reliable information. This is because U.S government seeks to avoid corporate scandals like Enron, WorldCom, and U.S. sub-prime mortgage crisis that rapidly led to the global economic recession. Good corporate governance allows for transparency as it incorporates both social, environmental and governance standard that influence investment decisions (Tarantino, 2008).
Indeed, corporate governance allows for structured separation of ownership and control that allows for culture of sound business ethics. Corporate governance remain as a clear guide in organizations that seek to direct and control a company’s function by establishing structures, rules, and procedures for effective decision-making.