Corporate governance is not corporate management. Corporate governance is the system of rules, practices, and processes by which a company is directed and controlled. Governance refers specifically to the set of rules, controls, policies, and decisions applied to dictate corporate behavior. The corporate governance of a company is important to investors as it shows the direction and business integrity of a company. Good corporate governance helps companies build trust with investors and the community.
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What is Corporate Governance?
Corporate-level governance includes the processes by which a company's goals are set and followed in the context of the social, regulatory, and market environment. It provides stakeholders with confidence that their trust in that company is well established, and deals with practices and procedures to ensure that a company is operated to achieve its goals.
Understanding Corporate Governance Correctly
Corporate governance and management are two very similar concepts. The two concepts are used in the same sense, and this is not wrong. Corporate governance refers to a phenomenon that starts from the top and spreads towards the bottom. The direction is unique from top to bottom. Governance is the name given to the science of designing, implementing, and implementing institutional mechanisms that will protect each other's interests, affect each other positively and provide efficiency and high performance in a win-win result.
The concept of governance is more modern. Rather than a rigid hierarchy, it is a principle and business management system that incorporates mechanisms that organize, manage, and mutually nurture cross and multilateral relationships. Fairness requires versatility. If information is stored from the customer, there cannot be transparency. Transparency cannot be real without governance. If one is not accountable, the concept of governance cannot be fully applied. The concept of responsibility is also related to governance. If it is not sensitive to the environment and causes environmental pollution and the society has not cared, it means that the concept of responsibility cannot be exercised properly.
In summary; The concept of governance is a management process that includes multi-actor and interactive connections and is based on the philosophy of joint management, planning, and public-private partnership, instead of relationships determined unilaterally by conventional management structures. Corporate management, on the other hand, is a form of management that plans the relations between all units constituting a joint-stock company, and especially the powers and duties of the management bodies, in order to protect the rights of shareholders and all other stakeholders.
Relationship Between Corporate Governance and Strategy in Businesses?
The strategy includes a road map for the future. Corporate governance is the name given to all of the management mechanisms that an institution should have in order to develop and grow in a sustainable structure, profitably and efficiently towards the future. In management science, it is necessary to measure an event in order to be able to manage it. An event that cannot be measured, known as data, and not dominated cannot be managed. If the same management is tried in different places, in the same way, 9 out of 10 will fail. Management, data, and information are all about being able to measure them.
In the past, everyone had encyclopedias at home. Encyclopedias were read page by page in order to obtain information. Nowadays, encyclopedias have been replaced by Google and YouTube. Having knowledge does not mean that management is good. It is necessary to take and analyze the information and determine the desired direction. If the way to go as companies can be clarified and written down, that is, if the strategy transformation activity is started, more data will be needed. As new data needs are added, the future strategy is developed. Another requirement of corporate governance is the determination of the strategy and the requirement of strategic actions. Although the strategic plan changes from company to company as a name, it appears as a concept that every company should have.
Being able to think strategically and make decisions should be one of the most fundamental competencies of senior management. Senior management should determine the strategy. Strategic planning is done by senior management bodies. You cannot expect a strategic decision from a newly hired specialist-level employee. The strategy is an important part of corporate governance as it is a phenomenon that must be implemented with the initiative of senior management.