Lesson 58 - Advanced Accounting Course

Lesson 58: Corporate Governance and the Role of the Board of Directors

🧠 What Is Corporate Governance?

Corporate Governance refers to the system of rules, practices, and processes by which a company is directed and controlled.

🏢 It ensures that a company is run responsibly, transparently, and in the best interest of stakeholders (shareholders, employees, customers, society).

📌 Goal: Balance power and accountability between management and stakeholders.

🧭 Why Does Corporate Governance Matter?

👥 Who Is the Board of Directors?

The Board of Directors is a group of individuals elected by shareholders to oversee the company’s activities and ensure it’s being run correctly.

🎯 The board acts as a bridge between shareholders and management.

🎓 Key Responsibilities of the Board

🪑 Types of Board Members 

📐 Principles of Good Corporate Governance 

🧾 Example Scenario

Problem: The CEO makes risky investments without board approval. No audit committee is present.

Consequence: Company suffers big losses, shareholders sue, reputation is damaged.

With Good Governance:

• ✅ The board sets clear limits and requires approvals
  
  

• ✅ An audit committee detects financial risks early
  
  

• ✅ Shareholder interests are protected

✅ Summary