What Are the Four Types of Corporate Governance?

To create a positive image of the company and instill in employees the rules of conduct in a team is the goal of any leader. But talk about ethical standards will remain if their observance is not regulated. A corporate governance code is being developed for this company.

Essence and the Main Elements of Corporate Governance

The efficiency of the company’s activity is determined by the following factors: the technical and organizational level of production, the qualifications of the staff, the level of motivation and remuneration, and the presence of a development strategy. These mechanisms are usually regulated in various regulatory documents (technical data sheets, plans, programs, tariff systems, etc.).

The Corporate Governance Code is a set of rules and values ​​that all employees follow and share. A well-written document that takes into account the opinion of each employee helps streamline business processes and increase labor efficiency. At the same time, in the team of any corporation, there is such a sphere of relations that is not amenable to formal regulation. These relations developed over a number of years according to unwritten rules under the influence of historical experience, the mentality of people, local customs and traditions, spiritual values, ​​and tastes.

The approach to the development of rules depends on what stage of development the company is at. For example, if a company has just been created, then the leader of one of the founders sets the tone for the formation of the management system. When the company has moved to the growth stage, you need to collect the rules and traditions of management that have developed in each division of the company, select the best ones, and form a general corporate governance system based on them.

In general, corporate management is based on the need to resolve conflicts of interest between owners and managers. Often, leaders are primarily concerned about their own interests and not about satisfying the interests of business owners. In addition, there are national specifics of corporate governance. For example, in Germany, the interests of shareholders prevail in making strategic decisions regarding the functioning of the company, while more attention is paid to maintaining a balance and taking into account the views of all stakeholders.

Four Types of the Corporate Governance

In a narrow sense, corporate governance; this is the management of enterprises or companies within the rights of shareholders. The board of directors of companies is the body responsible for corporate governance. In this context, corporate governance is understood as a set of systems that regulate relations between shareholders and the top management of the company.

The following characteristics of a corporate business organization are distinguished:

  • Independence of a legal entity;
  • Limited liability of investors;
  • Ability to transfer shares owned by individual investors;
  • Centralized management.

Corporate governance is implemented in various forms and types. Types often mean management models that are inherent in certain countries. Some researchers distinguish the following types (types) of corporate governance:

  1. management affecting the interests of management;
  2. management affecting the interests of shareholders;
  3. management affecting the sole proprietor;
  4. management affecting the company.

In accordance with this type of corporate governance, the entire management process is based on a corporate structure that does not have majority shareholders. In this state of affairs, there are no large groups of owners; that is, control over the corporation is in other hands.