January 26, 2022


Accounting + Finance Blog

Business term: Corporate Governance report


In addition to the aforementioned nonfinancial reports available in an annual report, is the corporate governance statement. The statement is reported for the benefits of the entity’s stakeholders. The board of directors is responsible for ensuring good governance of companies’ resources, especially humans. But what is the corporate governance report?

Meaning of corporate governance report

Corporate Governance report is a set of principles prepared by the board of directors that guides how an entity is directed and control for the benefit of its stakeholders.

Key Explanations

It is a set of principles. Corporate governance, as it were, is about principles. The Cadbury report of 1991 that set out why companies should present a corporate governance report stated four principles of good corporate governance. This includes Fairness, accountability, responsibility, and transparency.

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It is set out by the board of directors. The board prepares a set of corporate governance that guides the business from the bottom-up. All employees at all levels must comply with these rules. Also, the board set up a corporate governance committee to ensure that every employee complies with its governance.

Corporate governance is an ethical issue on the part of the board of directors. The behavior of employees to the companies’ stakeholders are the responsibility of the board of directors. If this is not curtailed, it affects board ethics. Therefore, stressing out the importance of good corporate governance.

The reason for a set of corporate governance is to protect the interest of stakeholders. This stakeholder includes and not limited to investors, customers, employees, suppliers, and government.

Should a small business has a set of corporate governance?

If I’m asked, my answer will be on the affirmative. Although corporate governance applied and are compulsory for companies listed in the main board of the Nigerian Stock Exchange, all small businesses should write out their corporate governance statement.

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Small businesses, as well as their larger counterparts, face similar issues. That is, protecting its stakeholders. To ensure these, good governance is vital. Therefore, the owner(s) of small businesses should set out governance statements in areas of their personal interest to the companies, employees, management, suppliers, government, and investors. This helps to avoid conflicts of interest among other things.

In this next business term, we will consider the term “income.”