Manag., July-2018 – Q64
0. Which one among the following is not a true statement?
- Option : A
- Explanation : Importance of Corporate Governance: The following are the main points of importance of corporate governance:
> Accountability and transparency encouraged by corporate governance are essential for capital market development in LDCs (less developed countries). All these ensure investors’ confidence and can help overall investment climate in a country. In the Harrod-Domar type model, economic growth is positively linked with investment. A developing country can gain much in terms of quantitative growth through the development of a good system of corporate governance.
> Enhanced corporate productivity and efficiency through good corporate governance ensures economic growth with social justice and development. Thus, it not only improves the economic conditions of people but also enhances social welfare.
> A disciplined and controlled corporate governance can considerably reduce financial turmoil and can ensure financial stability, both of which are crucial for economic growth and development. In the past, many corporations failed not because of their products and services but because of their bad corporate governance.
> A good corporate governance can considerably reduce corporate fraud and corruption. In such cases, not only is public confidence raised but also national prestige is enhanced.
> Competitive product and factor markets can be promoted and sustained by corporate governance (Meisel, 2004). This is beneficial not only for corporations but also for society. This can ensure allocative efficiency in the management of scarce resources.
> A good corporate governance is necessary for successful international business as it increases confidence, product quality, prices, social responsibility and environmental protection.
> A better social responsibility generated by good corporate governance can enhance social development, social welfare, and public image and confidence. All these can help the corporations to build social capital and trust.
> A good corporate governance ensures environmental protection and sustainable development. This not only reduces the public cost but can also ensure better human health.
> An ethically inspired CG ensures employees’ welfare and consumers’ welfare and is in favor of the stakeholders’ interests. Good corporate governance does take into account the welfare of all the stakeholders and thereby ensures justice and fairness to all concerned.
> A good corporate citizenship is a sort of national pride and asset. It is beneficial in many ways to the society, employees, stakeholders and of course, the nation.
