Corporate governance
Corporate governance is the system through which companies are directed, supervised and held accountable by boards, management, shareholders and other institutional stakeholders.
Definition
Corporate governance comprises the structures, rights, duties, controls and information processes that allocate authority among a company’s board, management, shareholders and stakeholders and establish accountability for corporate decisions.
Governance architecture
Authority
- Board and management powers
- Delegations
- Committees
- Reserved matters
Accountability
- Duties and incentives
- Controls and assurance
- Performance evaluation
- Disclosure
Participation
- Shareholder rights
- Stakeholder engagement
- Voting and meetings
- Redress and challenge
Board role
The board approves direction, selects and oversees senior management, monitors risk and performance and makes major decisions under applicable law. It should provide informed challenge without assuming day-to-day management. Composition, information quality, independence, expertise and time commitment influence effectiveness.
Key relationships
| Relationship | Governance tension | Institutional response |
|---|---|---|
| Shareholders and board | Ownership rights versus delegated authority | Voting, disclosure and board accountability |
| Board and management | Oversight versus executive autonomy | Delegations, reporting and evaluation |
| Majority and minority owners | Control versus equal treatment | Conflict procedures and minority protections |
| Company and stakeholders | Corporate objectives versus external effects | Law, engagement and responsible decision processes |
Formal versus effective governance
Committees and policies do not guarantee good governance. Boards need reliable information, candid debate, documented conflicts, escalation routes and the capacity to act. Governance quality becomes especially visible during transactions, crises, leadership succession and financial distress.
Related concepts
Sources and further reading
View sources and editorial notes
- OECD, G20/OECD Principles of Corporate Governance.
- Applicable national company law and governance codes.
- Institute of Internal Auditors, Three Lines Model.
Editorial note: Directors’ duties and shareholder rights vary by jurisdiction and corporate form. This entry is not legal advice.