Chapter 1: Conceptual Approach of Corporate Governance

The origin of governance crisis can be traced back to the very inceptive idea about a corporate form of business having two distinct entities, that is, control and ownership. Corporate Governance (CG), however, has predominately become an area of academic research and public debate in both the developed and developing nations since the 1990s; although the area has been attracting the interest and attention of scholars and academicians since a long time. In very simple terms, CG is the mechanism which deals with direction, administration and controlling of organisations. CG systems and processes are also related to different organisational issues such as delegation of authority, measurement of performance, assurance mechanisms, reporting requirements, accountabilities for stakeholders, etc. CG mechanisms state the rules, regulations and methods for taking decisions on corporate issues and problems through which the companies’ objectives are set, as well as the means of attaining those objectives and monitoring the performance. It also looks after the relationship in various CG participants, in determining the strength and direction of the relation and their effect on the performance and operation of organisations. The central participants or players of CG are the owners or shareholders, management, board of directors and so on.