DISCUSSION Where’s the pulse?

How our understanding of corporate governance is holding us back

Corporate governance has for a long time felt remote from the real world of wealth creation? Why?

One reason for this sense of unreality, which I discussed last week, is the assumption that companies are the same and need the same corporate governance arrangements.

Yet that is not the only problem with the teaching and the practice of corporate governance. Its foundations need re-excavating.

Here is how the Chartered  Corporate Governance Institute of the UK and Ireland  -formerly the Institute of Chartered Secretaries and Administrators, defines it –

Corporate governance refers to the way in which companies are governed and to what purpose. It is concerned with practices and procedures for trying to ensure that a company is run in such a way that it achieves its objectives. This could be to maximise the wealth of its owners (the shareholders), subject to various guidelines and constraints and with regard to the other groups with an interest in what the company does. Guidelines and constraints include behaving in an ethical way and in compliance with laws and regulations. From a shareholder’s perspective, corporate governance can be defined as a process for monitoring and control to ensure that management runs the company in the interests of the shareholders.

Read the rest here.