Definition
Corporate Governance
Corporate governance is the system of rules, practices and controls by which a company is directed, overseen and held accountable to its stakeholders.
Good governance covers board composition and independence, transparency and disclosure, audit and internal controls, fair treatment of minority shareholders, and ethical conduct. In India it is shaped by the Companies Act, SEBI LODR (with its detailed corporate-governance chapter) and the work of committees that have refined the framework over time.
Strong governance reduces the risk of fraud and value diversion and tends to command an investor premium, while governance lapses have triggered some of India's biggest corporate scandals. Independent directors, audit committees, RPT controls and disclosure norms are its main pillars.
Related terms
- Board of DirectorsThe board of directors is the group elected by shareholders to oversee a company's management and set its strategic direction.
- Independent DirectorAn independent director is a board member with no material relationship with the company, brought in to provide objective oversight.
- Related-Party TransactionsRelated-party transactions (RPTs) are deals between a company and parties connected to it, such as promoters, directors or group entities.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.