Corporate Governance : The Relationship Between Shareholders, Management And The Board Of Directors

Corporate Governance : The Relationship Between Shareholders, Management And The Board Of Directors

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Corporate governance refers to the relationship between shareholders, management and the board of directors of a corporation and how each of these participants influence the direction and performance of the corporation. The governance of a corporation directly relates to how that company will operate and whether that company will be successful. Corporations that operate using sound, moral corporate governance lay the groundwork for a corporation that has integrity and efficiency in financial markets. When a corporation is being governed by sound practices it leads to better financial decisions. When corporations prosper, it leads to an economy that can grow and provide the United States citizens with a better quality of life as well as having an overall positive impact on society.

Within a corporation, the Board of Directors are chosen to represent shareholders and responsible for ensuring that the motives of management, strategic plans for the future and overall best interest of the organization is in line with the shareholder’s expectations. Shareholders have invested money into the company and are actual owners of the company. Management, with the chief executive office as the head, is responsible for ensuring the day to day operations meet productivity and financial expectations for the company. Stakeholders such as vendors, suppliers, and customers must be taken into consideration before and during strategic planning. Each of these groups has an impact on the prosperity of the corporation. Shareholders who are not receiving the dividends expected may sell their shares and invest in the competition. Managers who do not understand strategic plans for the future may make changes to staffing that results in less profi...


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...ations or special interest groups. Many employee advocate groups promote an increase in the minimum wage whereas corporate management has fought to keep minimum wage low to keep costs low. (Vaterio, 2015)

Corporations are a critical part of the economy structure. Within the corporate governance structure, the Board of Directors has the ultimate authority to make strategic decisions that add value to the stakeholders and ensure the strong economic development of the corporation. Corporate success and economic growth are dependent on good corporate governance. Corporate governance is also responsible for ensuring investors maintain a high level of confidence and that the company is able to lower the cost of capital while developing new products and services. Within the scope of the United States economy, corporate growth means economic growth of the country.

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