LEGAL ASPECTS OF BUSINESS

ASSIGNMENT

TOPIC: Why is corporate governance

important? Explain it with the help of
example.

Submitted to: Submitted by:

Ms Kritika Agrawal Shivani Pal
MBA(gen)
Roll no.-8, B
 CORPORATE GOVERNANCE

It is the system of rules, practices and processes by

which a firm is directed and controlled. It involves
balancing the interests of a company’s shareholders,
financiers, government, suppliers, customers,
management. As it also provides the framework for
attaining a company’s objectives, it encompasses every
sphere of management, from action plans and internal
controls to performance measurement and corporate
disclosure.

IMPORTANCE OF CORPORATE
GOVERNANCE

 Lowering Risk: Scandals, fraud, and criminal

liability of the company can be prevented or
avoided altogether, means through corporate
governance risk can be reduce.

 Public Acceptance: Because of disclosure and

transparency that comes with corporate governance
public accept it widely.
 Public Image: in today’s world every corporation
wants to maintain their good image and for this
high level of corporate governance is needed.

 Social Responsibility: Today social responsibility

is given a lot of importance. The board of directors
have to protect the rights of customers, employees,
shareholders, suppliers, local communities etc. this
is possible only if they use corporate governance.

 Globalisation: today every company wants to get

globalise, means they want to sell their goods to
different countries. So, they have to attract foreign
investors and foreign customers. They also have to
follow foreign rules and regulations, all this
requires corporate governance. Without it , it is
impossible to enter, survive and succeed the global
market.

 Example : if we talk about coca cola company , its

commitment to corporate governance is very good.
It helps in promoting long term interests of
shareowners, strengthens Board and management
accountability and help building public trust in the
company.
 The board of directors has established corporate
governance guidelines which provide a framework
for the effective governance of the company. The
important components under it are Board’s
mission, director’s responsibilities, etc.

 Example: if we talk about Enron Company, Chief

Financial Officer (CFO) of this company has
violated the rules and regulations of corporate
governance. Firstly they showed fake profile of that
how strong their corporate governance is and then
manipulation of accounts is done by their own
company’s CFO.