1) Ensuring Accountability: One purpose of corporate governance is to ensure accountability within an organization. This involves establishing a clear framework of rules and procedures that regulate the conduct and decision-making of the board of directors, management, and employees. By doing so, corporate governance holds individuals and the organization as a whole accountable for their actions, ensuring that they act in the best interests of all stakeholders, including shareholders, employees, customers, and the broader community. This accountability helps prevent misconduct, unethical behavior, and misuse of company resources, ultimately protecting the organization from reputational damage and legal consequences.
2) Safeguarding the Interests of Shareholders: Corporate governance also aims to safeguard the interests of shareholders, who are the owners of the company. Shareholders invest their capital in the organization with the expectation of receiving adequate returns on their investment. Through corporate governance mechanisms such as disclosure of timely and accurate financial information, protection of shareholder rights, and equitable treatment of shareholders, the interests and rights of shareholders are protected. This ensures that the decisions and actions of the board of directors and management are aligned with the long-term sustainable growth of the company and the maximization of shareholder value. By promoting transparency, fairness, and accountability, corporate governance helps build trust and confidence among shareholders, attracting more investments and supporting the organization's competitiveness.
Explain two purposes of corporate governance in an organization
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