Corporate governance is the practice of ensuring a corporation conducts itself accountably, fairly and openly in all its dealings. It is the responsibility of a company’s board of directors.
One of the main goals of corporate governance is to ensure a company’s leaders are managing the finances of the business effectively and that they always act in the best interest of stakeholders (shareholders, employees, customers, suppliers and creditors).
Companies often have their own corporate governance frameworks—rules and processes for managing the conduct of the organization. Most also have to comply with external regulations or laws governing their industry or sector.
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Canada passed a law in 2003 to strengthen corporate governance. Based on the U.S. Sarbanes-Oxley Act (SOX), this Canadian law––Bill 198, dubbed “C-Sox”––aims to create confidence in the Canadian market and protect investors from corporate scandals. It includes a requirement for all companies to have an audit committee and for chief executive officers (CEOs) and chief financial officers (CFOs) to take personal responsibility for the company’s internal financial controls and reports. C-Sox also makes it a federal crime for a company employee to pressure or manipulate an auditor into creating misleading financial statements.