Introduction

It is often argued that a company’s board of directors is responsible for the company’s corporate practices, as it is up to the board to decide and establish suitable corporate governance values and structures, processes and practices within its business model. Thus, the aim of corporate governance as often understood is to ensure that companies that are not managed by their owners are run in the best interest of the shareholders. As agents, the board members and managers are responsible for protecting the principals’ (shareholders’) interests, and board members are in turn accountable to shareholders and the company. In a broader perspective, corporate governance is the set of processes, customs, policies, laws and institutions that affects the way in which a corporation is directed, administered or controlled in order to facilitate the interests of stakeholders such as employees, shareholders, customers and banks. Good corporate governance plays a vital role in underpinning the integrity and efficiency of financial markets. Poor corporate governance weakens a company’s potential and, at worst, can pave the way for financial difficulties and even fraud.