Introduction
In the emerging market economy, the improvement for the corporate governance is south after. In the principle of the corporate governance, different public policy objectives and its importance is emphasized through the ongoing changes. A good corporate governance reduces emerges in the market vulnerability to the financial crises, reinforcing of the property rights, reduction on the transaction costs and the cost of capital that in the long run will lead in the market development. On the other hand, the weak corporate governance can influence the reduction of the confidence among the investors and can also discourage the external investment.
Corporate Governance in the Market
Different researchers added the credit in describing the well founded corporate governance, its structures and its processes. However, only few can describe the tacit meaning of the corporate governance. Simply, corporate governance refers to the different processes that can apply in the direction and control of the companies. It is concern in the relationship among the management, board of directors, and the shareholders. An organization with good corporate governance contributes in the sustainable economic development by enhancing the performance of the companies and increasing their accessibility to the external investment or capital (ROSC, 2006). Corporate governance is applied with the guiding principles to promote the public awareness in the importance for the effective operation of the companies and for ensuring the accountability, transparency, and protection of the shareholders with their rights through the practices in public education, advocacy, and dissemination.
Annual Audit and the Application of the Codes
The audit team applies the importance of the code which is respected by different companies. The audit committee adds the role of the corporate governance in achieving the objectives and as well the advantage that it might bring in the economy of the country. The function of the credit union creates an efficient business performance. Through the confidence in the performance of the companies, the meaningful assistance of the various audit bodies. In addition, the good corporate governance enhanced the fiduciary responsibilities.
The standards of the code justified the different requirements of the corporate governance practices. It ensures the informational strategies that become the basis in improving or fostering the improvement of the regulations in the capital, market and the performance of the entire organizations. It is very evident that the different entities such as the stock exchanges, corporations, investors, or the associations of the directors and the managers (Heugens, and Otten, 2005).
Impact on the Shareholder
The impact of the corporate governance also affects the shareholders as well as their confidence. Because all of them are well informed regarding the performance of the business, such as in the accuracy and transparency of the financial statements. The shareholders that they are more secured. Through the reports, the chances for the fraudulent actions and different improper transactions are reduced but turn in enhancing the investors’ confidence (SECP, 2003). The corporate governance also faces different challenges and constraints due to the developing, emerging, and transitional economies (Vasilecu, 2008).
Moreover, the idea of corporate governance takes considerable advantages once the system proved itself to be effective. First is promoting the efficient use of resource of both within the company and the economy. And because corporate governance can lower transaction costs associated with corporate information access, the managerial incentives that are risky for profits are diminished. It also facilitates the proper access to capital, and could complement to institutional and legal framework of the organization. And most of all, corporate governance can contribute to lessen the corruption in the business.
Conclusion
The corporate governance in the organization is an essential process wherein every organization should incorporate all their practices. With the provision and guiding cods of the corporate governance, the organization are aligned in reaching for their goals thus, lessening the different threats that usually comes in the internal part of the organization. The idea of corporate governance as well as creation of strong relationship among the shareholders is a great opportunity that the organization can provide. Most of the shareholders feel doubt in the ongoing operation for their investment is incorporated in the cycle of the business. The good return or profit of the business might help lessen their worries and promotes good leadership.
References:
Heugens, P., & Otten, J., 2005. Corporate Governance Reforms around the World, Tjalling C. Koopmans Research Institute [Online] Available at: http://www.uu.nl/uupublish/content/05-08.pdf [Accessed 26 Feb 2010].
ROSC, 2006. Corporate Governance Country Assessment, Report on the Observance of Standards and Codes [Online] Available at: http://www.worldbank.org/ifa/rosc_cg_sen_eng.pdf [Accessed 26 Feb 2010].
SECP, 2003. Impact Assessment of the Code of Corporate Governance 2002 [Online] Available at: http://www.secp.gov.pk/Reports/ImpactStudyCCG.pdf [Accessed 26 Feb 2010]
Vasilecu, L., 2008. Corporate Governance in Developing and Emerging Countries, The Case of Romania [Online] Available at: http://mpra.ub.uni-muenchen.de/10998/1/MPRA_paper_10998.pdf [Accessed 26 Feb 2010].
Other Source:
Corporate Governance Initiative [Online] Available at: http://www.csd.bg/fileSrc.php?id=10124 [Accessed 26 Feb 2010].
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