ature of Corporate Governance:
uman society needs governing. Whenever power is exercised to direct, control andregulate social activity affecting people·s legitimate interest governing comes to thefore. Governance is necessary whether the social or economic group is nation, State, aprofessional body or a business corporation.
ach has its governing body and particulargovernance activities. Governance identifies rights and responsibilities, legitimizesactions and determines accountability. It is concerned with derivation, use andlimitations of power.Corporate governance is concerned with the process by which corporate entities andparticularly limited liability companies are governed. Specifically, it is concerned withthe exercise of power over the direction of the enterprise, the supervision of executiveactions, the acceptance of duty to be accountable, and regulation of the corporationwithin the jurisdiction of the State in which it operates. Primarily, corporate governanceis connected with the board of directors, its structure, style and processes, theirrelationships and roles, the linkages and activities, as well as the roles of company·smembers, auditors and others.Corporate governance has two aspects as follows:1.
Internal Aspects: these refer to the set of organizational rules within acompany. These aspects comprise of the following:(a
Sound internal processes and procedures(b
Sound Philosophy based on ethical principles(c
Good quality leadership by the board and senior management(d
The management·s mindset imbued by vision, sense ofresponsibility, respect for law and a value system2.
xternal Aspects: These aspects are reflected through a corporate entity·sfocus on profit optimization rather than maximization as well as the existenceof smooth relation between the company and the various stakeholders. Theseaspects relate to the assessment of performance of the company throughmarket mechanism. Both the above aspects must ensure the ushering of thecorporation into an era where no single person or group could commandconcentrated decision-making power.