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“A corporation is an invisible, intangible and artificial body, that exists in the eyes of the law and has properties defined in the charter which has created it.” (Prashad, 2008)

Corporate governance refers to the existing relationship between the different participants, and defining the direction and performance of a corporate firm. The suppliers, staff, creditors, customers and the community are other actors in corporations who influence governance. (Prashad, 2008)

The rise of the concept of corporate governance can be linked to the economic recession of the late nineties and the early years of 2000’s which victimized Japan, is defined as a “governance recession”. The consequent downturns in the Japanese economy, mainly insufficient trading and low return on investments were results of a weak/inappropriate corporate governance structure that was unable to keep pace with the dynamic business environment. (Prashad, 2008)

Corporate Governance has emerged to become a crucial element for any business. After corporate scandals such as Enron in the USA, Worldcom in the UK and Satyam Computer Services in India, investors and governments demanded better corporate governance practices by the businesses. (MBA, Risk Management, 2010)
Its main objectives are ensuring:
Achievement of corporate objectives through effective decision making.
Fair disclosure of financial and strategic decisions.
Transparency of business transactions.
Promoting ethical code of conduct and values in a firm.
Protecting the interest of the shareholders and maximizing shareholder’s wealth which is the core objective of any business.
Legal and statutory conformance. (Business Portal Of India, 2014)

Who are independent directors? They are external directors ...

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...onitoring regulatory systems in India and other countries. It reflected upon the incompetence of independent directors which called for a stronger corporate governance mechanism in India. (HEATHER TIMMONS and BETTINA WASSENER, 2009)
To conclude, Violation of ethics to maximise profits can lead to severe legal and civil issues. The key to gain shareholders’ trust is business transparency. Efficient and effective corporate governance improves the company’s reputation and minimises the occurrences of penalties, lawsuits, conflicts and frauds. It is essential for every business to have an independent director who has an in-depth understanding of the company’s operations and information. But, these directors should also understand their own value and the important role they play in the success of a firm. Thus, they should carry out their duties in a fair and just manner.