Corporate governance is a priority for firms because it presents opportunities to manage risks and add value. Focus of corporate governance is shifting from mere obligation and compliance with laws and listing standards, to a business imperative for many firms. Corporate governance significantly influences the firm's performance. Good corporate governance is a key driver of sustainable corporate growth and long-term competitive advantage. This article highlights the meaning and scope of corporate governance. It focuses on OECD principles of corporate governance. It also explains objectives of corporate governance system.

Corporate governance focuses on a company's structure and processes to ensure fair, responsible, transparent and accountable corporate behavior. Corporate governance stands for responsible business management geared towards long-term value creation. There are actually many definitions of corporate governance but they all concern the following elements.

Corporate governance process is not a static one-time exercise; rather it is an enduring and dynamic process. Changing patterns of share ownership, particularly in the US and the UK, have led to a greater concentration of share ownership in the hands of institutional investors, such as pension funds and insurance companies. Institutional investors are increasingly seeking to diversify their portfolios and invest overseas. They then look for reassurances that their investment will be protected. It is necessary that firms regularly assess, review and update existing corporate governance standard, structure and practices as financial markets appreciate only long-term commitment to good corporate governance practices rather than one-time exercise.

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