Discovering Basic Objectives of Corporate Governance

Corporate governance

Corporate governance is one of the essential elements of big business. Only its correct setting allows the company to grow, develop and increase its capitalization. In this article, you will learn about the main goals of corporate governance.

General concepts

Corporate management focuses on solving three main problems:

  • Developing strategies and ensuring the maximum efficiency of the corporation (here, it intersects with corporate governance).
  • Attracting investments.
  • Fulfilling its legal and social obligations.

Corporate management should be distinguished from general management. Its objects are only the corporation and its primary divisions to the extent that they act as parts of a single whole (their functioning as independent entities no longer belongs to the sphere of interests of corporate management). It is a kind of strategic management, but it has a narrower framework (“in charge” of development strategies, portfolio, financial, investment strategies of the company, and elements of another functional system common to all departments.

Goals of corporate governance

The goals of corporate governance, which should not contradict the national socio-economic interests, are:

  • Ensuring a balance of interests, firstly, of outsiders and insiders, and, secondly, of owners with formal legal power and hired managers, in whose hands real economic power is concentrated. In the absence of conflicts between them, a synergistic effect is achieved in the corporation’s activities. This happens based on certain principles (legal, ethical, procedural) accepted in the business community and a clear distinction between ownership and management.
  • Formation of mechanisms by which the control of shareholders over the top administration and its responsibility to them for the results achieved is ensured.

In general, possible to say that the well-being and growth of the company lie at the root of corporate governance.

Tasks of corporate governance

The main objectives of corporate governance are:

  • Preservation of the corporation as a legal entity and an independent economic entity, growth of its capitalization (by increasing the share price on the stock exchange).
  • Development and decision-making on the rational structure of business areas (acquisition, re-profiling, liquidation of enterprises, etc.).
  • Protecting the interests of owners, building a system of relations with them.
  • It is achieving a balance of interests of owners, management, and other stakeholders who have the opportunity to influence the corporation (affiliates).
  • Definition of dividend policy.
  • Attracting investments and strengthening the economic and production potential of the company.
  • Development and implementation by managers under the control of the owners of corporate strategies in diversification, mergers, and acquisitions, and the fight against competitors.
  • Management of assets and financial flows.
  • Implementation of market expansion.
  • Improving the system of remuneration of senior managers.
  • Development of corporate culture, creation of a high image, investment attractiveness, gaining the trust of customers, partners, government, and the public.
  • Maintaining favorable conditions for effective management of current activities and profit maximization.
  • Conducting an effective social policy, etc.

The management of a corporation’s current activities (business) as a large organization, consisting of many formally completely independent or partially independent divisions by professional specialists in the course of business operations, began to be called corporate management.