Corporate Governance : Journey from Compliance to Competitive Advantage

Corporate governance stands for responsible business management geared towards long-term value creation. Views of corporate governance are shifting from mere obligation and compliance with laws and listing standards, to a business imperative for many firms. Corporate governance significantly influences the firm performance. Good corporate governance is a key driver of sustainable corporate growth and long term value creation. Corporate governance is a priority for firms because it presents opportunities to manage risks and add value. Corporate governance has come to be viewed as a differentiator among firms as good governance practices provide a sustainable competitive advantage. This paper highlights various meanings and definitions of corporate governance and recommended standards of corporate governance. Paper mainly focuses on OECD principles of corporate governance. It also explains purpose and objective of corporate governance. This paper also discusses principal drivers for an increased demand for good corporate governance. Paper also underlines risk associated with poor corporate governance practices. An increasing amount of empirical evidence shows that good corporate governance contributes to competitiveness and long term value creation. Corporate governance rating is positively associated with financial performance measures like Tobin's Q. Paper emphasizes benefits of good corporate governance and also lists finding of prior studies