Approaches to Corporate Governance

Corporate Governance is a system by which companies and directed and controlled. CG has both purposes and objectives. The basic purpose of CG is to monitor those parties within a company which control the resources owned by investors.

The primary objective of sound CG is to contribute to improved corporate performance and accountability in creating long-term shareholders’ wealth.

What approaches are available to Corporate Governance?

There are different approaches to the communication, management and monitoring of codes.

Decisions as which approach to use can be governed by many factors.
i. Dominant ownership structure ( Bank, family or multiple shareholders)
ii. Legal system and its power/ability
iii. Government structure and policies
iv. State of the economy
v. Culture and history
vi. Level of capital inflow or investment coming into the country
vii. Global economic and political climate

There are fundamentally two approaches that are applicable namely.
i. Rules based approach
ii. Principles based approach