Need help? Talk to an expert

Connect Us

Corporate governance, components and objectives

The global economic recession and administrative and financial corruption contributed to economic collapses that affected local and international institutions. Researchers, administrators, and economists have been looking for policies and principles that help achieve the institutions’ goals for their business correctly, like enhancing access to capital and assisting the institution to continue in business. Working in a competitive environment and the ensuing rise in productivity; among these policies was governance, which is defined as how institutions are managed to determine who has the authority and accountability and who takes decisions regarding the affairs of the institution, as well as to set the goals and strategies necessary to achieve them. In its simplest form, governance refers to a set of tools that help management and the board of directors deal with potential challenges better. These tools help to ensure that decision-making processes are appropriate and that controls are in place to balance the interests of all stakeholders, including shareholders, employees, suppliers, customers, and society.


Who are the principal players in government?

1- Shareholders: They are the ones who provide the capital to the institution through their ownership of the shares, and maximize the value of the institution in the long term, which determines the extent of its continuity in return for obtaining the appropriate profits for their investments, and they have the right to choose the appropriate members of the board of directors to protect their rights

2- Executive Management: It is in charge of carrying out the institution’s actual management and reporting to the Board of Directors on its efficient operation.  The management is also responsible for maximizing the profits of the facility and increasing its value. Management is the link between the Board of Directors and the rest of the parties dealing with the facility.

3- The Board of Directors: They represent the shareholders as well as other parties such as stakeholders, and the Board of Directors selects the executive managers who are entrusted with the authority of the daily management of the business of the institution and draws up general policies and how to preserve the rights of shareholders.


To sum up, all these parties have an interest in the success and continuation of the institution, and they have rights that the institution must maintain and provide for them.


The importance and objectives of Corporate governance:

By increasing profits, returns on investments, and cash flow within the company, governance helps to improve financial performance. Additionally, it demonstrates how it has helped the company’s reputation by boosting employment opportunities as well as interest in its shares and products. The oversight function that governance plays in the institutions contributes to its significance. Some advantages of using it in the institutions are as follows:

  1. Enhancing the efficiency of operations management and optimal utilization of public resources in areas that achieve social return and contribute to the achievement of strategic goals.
  2. Establishing a culture of participation in formulating policies, making decisions, and evaluating services, in a way that enhances compliance with laws and ensures the activation of the role of employees and customers.
  3. Establish a culture of attachment to the institution and a sense of responsibility in achieving the strategic goals.
  4. Responding with high quality and appropriate speed to the requirements and needs of customers, to achieve their satisfaction.
  5. Promoting a culture of accountability and transparency and assigning responsibility for achievement and results.
  6. Fighting and combating corruption in all its forms and practices.


Governance dimensions:

Research in corporate governance and its rules has reached results through which the organizational dimensions of corporate governance can be identified as follows:

  1. Supervisory Dimension:

It is to support and activate the supervisory role on the performance of the executive management and stakeholders, including shareholders.

  1. The Regulatory Dimension:

It is the support and activation of control, whether at the internal level on the one hand, or the external level of the enterprise on the other hand. Strengthening and activating control at the external level of the enterprise relates to the implementation of control systems and risk management systems.

  1. The ethical dimension:

It is the process of creating and improving the control environment that includes ethical rules, integrity, and honesty, and spreading a culture of governance at the level of enterprise departments and the business environment in general.

  1. Contact and communication:

It is the process of designing and organizing the relations between the board of directors of the institution and its executive management on the one hand, and external parties, whether they are stakeholders or supervisory, control and regulatory authorities on the other hand.

  1. The Strategic Dimension:

It is planning for the future and looking forward to it based on conducting a careful study and also knowing enough performance information, whether past or present, which will help stakeholders formulate business strategies and encourage strategic thinking.


Corporate Governance Elements:

Corporate governance refers to the framework of policies and guidelines that guide an organization’s behavior, decision-making, and practices. This infrastructure is built on three core principles: accountability, transparency, and justice.

1- Transparency: This relates to the open, accurate, and immediate disclosure of information related to the company’s performance that could affect future decision-making. These include financial, business, legal, and administrative information.

2- Accountability: This component means taking responsibility and answering for the company’s actions and performance before the shareholders, investors, workers, local communities, and concerned governments. This responsibility requires the preparation of periodic and detailed reports and accounts on the company’s performance, in addition to the implementation of applicable laws and regulations.

3- Justice: This component relates to dealing fairly and balanced with all concerned interests in the company, including shareholders, investors, workers, local communities, and concerned governments. This component includes ensuring diversity and a good representation of nationalities and genders on the board of directors and at all levels of the company, in addition to maintaining ethical standards and social and environmental values in all aspects of the company’s business.


To conclude, it can be said that corporate governance is a critical factor for the success of companies and institutions in achieving their future goals. Good corporate governance helps build an environment of trust, transparency, and accountability needed to promote long-term investment, financial stability, and business integrity, and thus greater growth and more inclusive societies. Although the concept of governance may seem complex at first, we must remember that the primary objective of governance is to provide a transparent, responsible, and sustainable work environment for all. To effectively manage facilities and maintain governance standards, they can improve trust and transparency in the market and improve relations with shareholders, customers, and society. Thus, this can lead to increased productivity, profitability, and success in the business.