Parties to corporate governance

Parties involved in corporate governance include the governing or regulatory body (e.g. the U.S. Securities and Exchange Commission), the CEO, the BoD, management, shareholders and other stakeholders.

All parties to corporate governance have an interest in the effective performance of the organization. Directors, workers and management receive salaries, benefits and reputation; whilst shareholders receive capital return. Customers receive goods and services; suppliers receive compensation for their goods or services. In return these individuals provide value in the form of natural, human, social and other capital.

A key factor in an individual’s decision to participate in an organization (e.g. through providing capital or expertise or labor) is trust that they will receive a fair share of the organizational returns. If some parties receive more than their fair return (e.g. exorbitant executive remuneration), then participants may choose to not continue participating (e.g. shareholders withdrawing their capital). Corporate governance is the key mechanism through which this trust is maintained across all stakeholders.