The Rules and Principles of Corporate Governance

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Corporate governance often refers to a set of rules and principles by which a company is directed. It provides a guideline for directing a company in order to fulfil its objective, brings added value to the enterprise, and is beneficial to the shareholders in long-term. (1) The rules and principals of corporate governance to an extent might be different in various companies, but some of these rules are similar in all the firms; such as accountability and responsibility towards the shareholders and commitment to conducting business in an ethical manner. (2) Family-owned companies are the leading form of business in many countries. In Middle East, over eighty percent of the businesses are either owned or run by families (3). In Latin America, Brazil, over 50 percent of the largest companies (more than 100 corporations) are family-controlled (2). A significant number of all the family businesses have been created in 1950s or early 1960s that means they are going to experience a generational change over the next five to ten years. There is no need to mention that a generational change makes corporate governance more essential for family-owned enterprises. As the time passes, a business goes through different stages; initiator, 2nd generation, 3rd generation and so on or as Harvard professor John Davis, according to Family Business Challenges (2) puts them, founder stage, siblings’ partnership, cousins’ confederation, etc. During the founder stage, normally a single person, founder, runs the venture. A set of rules are certainly necessary for this stage, but the main challenge in keeping a family business intact rises thereafter that is to preserve the unity of the family members and their interests. This problem is certainly more cri... ... middle of paper ... ...hareholders rights. The other factor is board of director which we discuss this topic before. And the last one is transparency and disclosure Information prepared and disclosed in accordance with high quality standards of accounting, financial and non-financial disclosure or Annual audit conducted by an independent, competent, and qualified auditor in accordance with the International Standards on Auditing. (1) (2) In conclusion, it was established that corporate governance is a crucial aspect of running family-owned enterprises. This essay put forward three elements of good corporate governance practice, but there are many more elements that can be incorporated in having a successful family business. In the end it should be mentioned that not one solution (element) but a combination of elements shall be designed company specific for the enterprise to succeed.

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