ACCA Applied Knowledge · Business and Technology · Governance in business organisations
Which of the following best describes corporate governance?
Corporate governance is the system by which companies are directed and controlled. It covers how the board, shareholders and other stakeholders relate to each other and how power and accountability are balanced. It is not simply day-to-day management or the preparation of financial statements.
- AThe system by which companies are directed and controlledCorrect
- BThe process of preparing and auditing the annual financial statements
- CThe day-to-day management of a company's operating activities
- DThe legal procedure for winding up an insolvent company
Explanation
Corporate governance is commonly defined as the system by which companies are directed and controlled. It concerns the relationship between the board, shareholders and other stakeholders. Day-to-day management is an executive function, not governance itself, and financial reporting is only one output of the governance framework.
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