The Advantages of Corporate Governance

Written by tyler lacoma
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The Advantages of Corporate Governance
Corporate governance improves access to capital. (billion dollar corporation image by Augustus Saxton from Fotolia.com)

Corporate governance refers to the ability of companies to manage themselves effectively. Corporate governance is the collective system of leadership used by executives and all major leaders in the company, including important shareholders. It dictates how decisions are made and who holds the power in the company. A strong corporate governance system will be aware of the company's current progress and will have the ability to make many changes in corporate structure as needed.

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Enhanced Performance

Corporate governance helps a company improve overall performance. Without corporate governance, a company tends to be weak and sluggish. Only a group of leaders working together can successfully foresee market changes and prepare the company to meet them ahead of time, while also managing the company in the here and now. It is too much work and too much responsibility for one person, or for only a loose body of leaders.

Access to Capital

The better corporate governance a company has, the more easily it can access outside capital that the business can use to fund its projects. Since corporate governance includes major shareholders, it connects investors with the business itself, and these investors use their resources and contacts to support the company monetarily. Due to these close connections, capital also tends to be less expensive to finance with a strong corporate governance system.

Better Standards

Corporate governance makes many decisions about business operations, but one of the most important decisions involves corporate standards. Standards affect the quality of products and the goals that the business has in technology, customer service, and marketing. The combined efforts of the business leaders allows the company to accurately judge competition and create standards that add value to the business's products or services.

Better Talent Utilization

Without a corporate governance, business leaders tend to flounder. The lack of clear organizational structure at the top of the company makes it difficult for people to move up the ladder or to aim for a particular position. With a strong corporate governance structure, however, people can find positions that utilise their talents more effectively, and the board of directors and top leaders of the business are always looking to add more talented people to their numbers.

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