Corporate governance covers the relationships among a company’s:
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Answer: D. Shareholders, board of directors and senior management
Explanation
Corporate governance establishes the formal framework of relationships between shareholders, directors, and executives. It ensures that company leadership acts in the best long term interests of its ultimate owners. Balanced oversight prevents conflicts of interest among these three core corporate stakeholder groups. Shareholders provide equity capital and elect the board of directors to oversee major policies. The board of directors hires, evaluates, and compensates senior management executives responsible for operations. Effective governance structures promote transparency, accountability, and ethical business conduct worldwide.
Strong corporate governance protects investors against fraud and executive mismanagement of corporate assets. Institutional investors actively review governance practices before committing large sums of capital to firms. Poor governance frameworks frequently lead to corporate scandals and rapid destruction of shareholder value. Shareholders and board of director ignores the vital operational role played by senior management. Board of directors and senior management leaves out the foundational ownership rights of company shareholders. Shareholders and senior management bypasses the essential oversight function provided by the board of directors.
- Subject
- Accounting and Finance
- Category
- Finance
- Topic
- —
- Difficulty
- medium
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