Multinational companies are striving to have good corporate governance (GCG) status since the Security Exchange Commission (SEC) demands that firms should protect the interests of all stakeholders.
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From a historical perspective, surprise failure of giant corporate bodies like Enron, ABC Learning Centres, Allco Finance, and Lehman Brothers hastened the need for GCG. In line with the failure of Enron, accounting as a discipline has been held accountable for the cause; therefore, accounting has to give out clear analysis of the company’s operations overtime (Shil 3). Aspects of corporate governance touch on the interests of investors, employees, customers, the local community, government of the region, and vendor partners.
The entire process has to monitor the operations of the company in order to ensure fairness, transparency, and equity to all the stakeholders. On the legal, ethical, and sustainable line, aspects of corporate governance attempt to maximize and protect the overall values of the shareholders.
These aspects help in enhancing the bodies’ performances as they make environments favorable for maximization of returns on investments, enhancement of operational efficiency and assurance on long-term production for organizations. GCG make corporations to attract highly competent workforce on a global basis.
GCG makes numerous investors to develop trust and make investment decisions. This concept has become an essential feature in the current corporations as they carry out both internal and external audits in line with the accounting standards.
Professionals in the accounting field compile information for any entity and reports at the end of a given time. Corporate governance and accounting improve the image of corporations if market participants coordinate them well. Notably, accounting attempts to eliminate bad governance within giant and small corporations.
Therefore, corporate governance represents the process of administration and control system within a company. The aspect determines how companies set and achieve their objectives, manage and assess their risks and optimize their performances (7). For sustainability of corporations, governance system has to be in line with the stipulated accounting principles. GCG, therefore, aims at creating value through innovation and exploration, and providing control systems that commensurate with the risks under focus.
For sustainability, companies mix sustainable development with corporate governance by identifying and comprehending their environmental and social effects and responsibilities on the market participants (Turner and Harbinson par. 3).
In these companies, sustainability helps in getting all voices on board by aligning the strategic environmental and social goals with the strategic direction of the companies to ensure that governance oversight systems comprehend and play their part in keeping their focus. GCG helps firms to protect themselves from financial challenges as it focuses on accounting department and financial internal systems.
Companies have to record and report financial information to both internal and external stakeholders in order to assist employees in carrying out their expectations within their firms. The boards play significant roles in evaluating the nature and significance of GCG, as well as relevance of sustainability. Since the management boards form critical departments of governance structures, they must possess high level of integrity and right skills to make rational decisions that can manage risks (par. 5).
In the boards, employee representatives participate in decision-making procedures for specified period. The wide inclusion in the board ensures that corporations protect the rights of employees. Non-executive directors and investors also help in bridging gaps between management and the stakeholders. Corporate governance enhances transparency, accountability, and awareness by considering the interests of all stakeholders in their operations.
Shil, Nick. “Accounting for good corporate governance.” JOAAG 3.1 (2008): 1-9. Print.
Turner, Martin, and Anthony Harbinson. Corporate Governance. Association of Chartered Certified Accountants. ACCA UK, 5 July 2009. Web.