The meaning of corporate governance

Generally

One thing that is clear about the concept of corporate governance is that there is no set definition as to what it means. Commentators often speak of corporate governance as an indefinable term, something – like love and happiness – which we essentially know the nature of, but for which words do not provide an accurate picture. Many have attempted to lay down a general working definition of corporate governance, yet one definition varies from another, and this often leads to confusion. Others, like the UK Cadbury Report (1992) and the South African King Report (1994), basically only say that corporate governance is ‘the system by which companies are directed and controlled’. That seems not particularly helpful in clarifying the meaning of the term ‘corporate governance’. Surprisingly, until quite recently, it was quite hard to find a formal definition of ‘corporate governance’, notwithstanding the ‘voluminous literature’ on this topic.

Several recent reports dealing with corporate governance have attempted to clarify the concept. One, for example, said that: