Companies are directed and controlled through a system of rules, practices, and relationships. Corporate governance is that system. It defines the rights and responsibilities of the board, management, shareholders, and other stakeholders, and it provides the structure through which objectives are set and performance is monitored.

Good governance aims to align the interests of those who manage the company with those who own it, while also considering the legitimate interests of employees, customers, and the wider community. Mechanisms include independent directors, transparent reporting, audit processes, and clear accountability for decisions. Failures of governance have produced some of the most damaging corporate scandals.

Codes and regulations set minimum standards, yet culture and leadership determine how those standards are lived. Investors increasingly evaluate governance quality when allocating capital. Effective governance does not guarantee success, but poor governance raises the probability of value-destroying behavior and loss of trust.