What is the primary purpose of corporate governance?

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The primary purpose of corporate governance is to ensure accountability, fairness, and transparency in a company's relationship with stakeholders, including shareholders, management, customers, suppliers, financiers, government, and the community. Strong corporate governance establishes a framework of rules and practices by which a board of directors directs and controls an organization. This includes establishing clear roles and responsibilities, making decisions with integrity, and reporting openly about the company’s operations and financial performance.

Such governance structures support the long-term success of an organization, helping to build trust with stakeholders and ensuring that the interests of all parties are considered. This is essential in fostering sustainable business practices and maintaining a positive reputation in the market.

While minimizing operational costs, maximizing stockholder profits, and enhancing workforce productivity are important aspects of running a business, they are not the overarching purpose of corporate governance. Instead, they are potential outcomes of effective governance that operates within a framework focused on accountability and transparency.

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