What are the Principles of the Corporate Governance (CG)? Several principles underpin effective corporate governance. These principles are business probity, responsibility, and fairness or equal opportunity. Corporate entities are expected to exhibit these qualities to ensure good governance. Embracing the outlined principles will improve relationships between companies, their shareholders, and the overall welfare of every economy. These principles are briefly discussed.
Business probity requires individuals in charge of companies to be open and honest in the discharge of their activities. According to Brain openness implies a willingness to provide information to individuals and groups about the activities of a company. In this regard, it is important to recognize that shareholders and investors need to know the position of a company to evaluate its performance. The timely delivery of information will enable them to achieve this purpose.
Good corporate governance disclosure requires handlers of companies to be honest in the discharge of their activities. Honesty requires managers to deliver factual information. A sign of honesty is that statements of companies are believed. However, Brain contends that “honesty might seem an obvious quality for companies, but, in an age of spin, and the manipulation of facts, honest information is perhaps by no means as prevalent as it should be.”
Corporate governance requires handlers of corporate entities to be responsible for the discharge of their duties. Investors require confidence that the company’s financial systems are secured and credible. Managers are therefore expected to work in this direction to meet investors’ expectations. Responsibility in the context of corporate governance includes other issues such as transparency and accountability. These principles are vital to the survival and welfare of every company. Thus, managers have to explain their actions to shareholders as well as investors to enhance their understanding of the direction of the company’s activities.
The principle of fairness requires impartiality and a lack of bias in corporate activities. In the context of corporate governance, the quality of fairness is achieved when managers behave in a reasonable and unbiased manner. In this sense, to ensure good governance shareholders are expected to receive equal consideration. This means minority shareholders should be treated the same way as majority shareholders.
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