The modern market is an investment market. Without investment resources, not a single enterprise can develop. Most recently, a potential investor was interested only in the current financial situation in the company in which he plans to invest. Today the situation is different. An important role is assigned to the assessment of corporate governance, the effectiveness of which directly affects the well-being of the company in the long term. The vast majority of investors are willing to pay for the shares of the company where corporate governance is implemented and works, even if the current financial indicators are inferior to competitors.
Let us try to understand what determines the importance of corporate governance, how it affects the results of the company’s business and what makes the Russian practice different from the global one.
Corporate management vs. company management
The term “corporate governance” today can be found in different branches of economic science. Due to the wide application of the concept, he lacks a single definition. For example, the International Financial Corporation (IFC) calls corporate governance “the structures and processes for managing and controlling companies”. Experts of the Federal Financial Markets Service add to this definition a mandatory link between management and economic performance of business entities, noting that capital attraction should be part of corporate governance.
The most comprehensive is the definition formulated by the Organization for Economic Cooperation and Development (OECD): corporate governance is a system of management and control over a company that has a mandatory structure. In the system there should be a distribution of rights and obligations between the participants of corporate relations (management, shareholders, and others. There are clear rules for making decisions. As part of corporate governance, the company’s objectives, funds for the implementation of these tasks and control are determined.
But, regardless of the approach, corporate governance of an enterprise contains common elements:
- Formed system of company management and control over its activities. The meeting of shareholders develops key decisions that are subsequently implemented by senior managers.
- The structure that determines the distribution of rights and obligations between the participants of corporate governance.
- Decision making rules, a framework for achieving goals and monitoring company performance.
Thus, corporate governance formulates uniform “rules of the game”, stabilizes the management process, and promotes the growth of confidence in the company from potential investors, government agencies and other interested parties. Need to know more on this? Then visit https://imperiallegal.uk/immigration/representative-overseas-business/ .
Corporate governance should be based on the understanding that the company’s long-term success is the result of teamwork, in which not only owners and top managers participate, but also ordinary employees, investors, suppliers, creditors and other partners. Mutually beneficial cooperation with each interested person is a contribution to the effective development and high competitiveness of the enterprise.