Governance makes or breaks a country if not properly carried out. The great economies of the world are characterized by good governance, while those economies below the threshold are characterized by poor governance. The same implication applies to the corporate world.
Corporate governance is essentially the lifeblood of any company and of every country’s economy. Yes, corporate governance cannot just be contained within a specific company because its effect can even reach the global economy.
Corporate governance is an orchestration of rules, systems, processes, and relationships in a company. This framework sets the limit to an authority to be exercised or entity to be controlled in a certain company.
It lays the foundation of the objectives to be met, identifies and monitors the risks to be assessed, and espouses the performance to be achieved. Thus a company can never succeed without having good corporate governance.
The importance of good governance is encapsulated in the company’s existence. A company characterized by good governance creates value in the goals that it sets at the onset. The foreseen potential risks that could endanger the company’s existence are provided with solutions based on a sound assessment of the problem. The target performance is clearly defined and aimed at for achievement.
Corporate governance as an indispensable aspect of every company provides a structure to which the company operates. The rules are clearly and specifically stated. The infringement of these rules is accorded with just consequences. The systems and processes are properly and implicitly outlined for ease of implementation. The relationships and authorities are plainly and clearly stipulated for thorough understanding of those who work in the company.
Meanwhile, today’s modern economy has been the true test of good corporate governance.Despite the worldwide economic turmoil, failures in the corporate world, and lurking of economic scandals, companies manage to survive. The companies’ survival amidst the problems that confront them is an indication that they have strong corporate governance.
Moreover, good corporate governance becomes the barometer for companies to gain access to international capital. The developed and developing countries of the world recognize the importance of such kind of governance because it also has an impact in every country’s economy.
This leads to the exclusion of companies with doubtful corporate governance in the list of countries that are granted international funding. That is why countries all over the world institute reforms in their economic programs to include improving the corporate governance of the companies in their territories.
The impact of corporate governance, whether good or bad, has far-reaching effects that extend up to the global economy. For this reason, the countries of the world, in order to protect their respective economies work, for reforms to improve or elevate the level of corporate governance in their territories.
From the framework which serves as the basis of a company’s operation and existence, corporate governance has evolved into an economic force that could bring up or pull down a country’s economy and impose its effects in the larger global economy.
This goes to prove that proper corporate governance is necessary in the sustainability — for all companies, for all countries, and for the whole global economy.
All Johannesburg Stock Exchange Companies are obliged to implement the recommendations of the KING 3 Code of corporate governance. This does not limit non-listed public companies and private companies or even trusts to adopt the King 3 Code of corporate governance to their businesses.