The Importance Of Corporate Governance

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Corporate Governance is the mixture of law, regulation and well fitting practices in the private sector which allows for the business to draw in capital(human and financial), perform efficiently and therefore sustain itself by generating economic value of a long time for its shareholders, while respecting interests of stakeholders.

Corporate Governance was introduced under the King Code 3 to bring financial reporting into opinion by examination of a company’s commitment to:

• Assess how the company has impacted their community both negatively and positively
• Determine how the company intends to ensure continuous positive aspects and to eradicate the negative ones in the year ahead (Yvette Russell, 2013)

It is about:

 How a business should
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(Wickramanayake, 2007)

5. Integrity

o The personal ethical position of professionalism and morality on high standards (Blessings, 2011) o If directors lead with integrity, company confidence will be promoted (Blessings, 2011) o Important way to measure how those involved in company are accountable to negatively and positively affected individuals (by company’s decisions) o It’s doing business truthfully and honestly

In summary, it is understanding that sometimes the maintenance of good corporate governance depends on judgment that can’t be backed up with codes and therefore integrity becomes very important.

6. Discipline

o Adherence of universally recognized behavior by management. o It includes awareness that the company has and its commitment to the fundamental principles of good governance (with particular attention to senior management)

Can be divided into three different sections:

o Self-discipline – right level of integrity o Market discipline – willingness to invest in a
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Role clarity for the owners and management team. (KPMG, n.d.)

 Governance allows owners and managers to display their roles and set apart the issues of ownership from management.
 Enables faster decision-making as managers and owners get to choose what to decide depending on issue at hand

ii. Purposeful strategic direction. (KPMG, n.d.)

 Governance is reliant on a final strategic direction defined and followed by company.
 Enables application of the correct resources to the most beneficial opportunities by owners
 Leads to company goals being achieved quicker – also minimizing wasted resources on activities that are less important

iii. Retention of staff. (KPMG, n.d.)

 Employee motivation is increased as a result of working in a business that has a clearly defined and communicated direction and vision
 Enables improvement on staff retention(important in attracting and retaining talent)

iv. Improved relationships with the bank. (KPMG, n.d.)

 Enables systematic management and financial reporting
 Fosters confidence from investors, funders and or bank.
 Results to improved access to capital.

v. Improvement in profitability. (KPMG,