What is Corporate Governance?

Corporate Governance refers to the systems by which a corporation is directed and controlled by its shareholders, directors, and officers. The structure of governance specifies the rights and responsibilities of different participants in the corporation with regard both to one another and outside parties. These laws generally relate to the boards of directors, managers, shareholders, creditors, auditors, regulators, and other stakeholders.

Through the governance system, a corporation sets and pursues its objectives and serves as a mechanism for monitoring the actions, policies and decisions of the various levels of management in the business.

Corporate governance became an issue of renewed public interest after the high-profile collapse of a number of large corporations in 2001-2002, primarily due to accounting fraud. Entities involved included Enron Corporation, MCI Inc (formerly WorldCom) and many others. These scandals and others led to the passage of the Sarbanes-Oxley Act in 2002. Intended to restore public confidence in publicly traded corporations, it had a number of requirements for reporting, transparency, accounting practice, and accountability of those in positions of corporate responsibility.

Corporate governance laws vary widely from state to state. Many choose to form corporations in one jurisdiction over another because of these laws, among others. In some instances, these laws may also have impact upon tax obligations, as well.

Should you have any questions regarding corporate governance, you can review the materials below or contact an attorney to address your particular questions. Lawyers in your area may be found on our Law Firms page.

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