Finance and Corporate Governance

Corporate governance is the mechanisms, processes and relations by which corporations are controlled and directed. Governance structures and principles identify the distribution of rights and responsibilities among different participants in the corporation (such as the board of directors, managers, shareholders, creditors, auditors, regulators, and other stakeholders) and includes the rules and procedures for making decisions in corporate affairs. Corporate governance includes the processes through which corporations' objectives are set and pursued in the context of the social, regulatory and market environment. Governance mechanisms include monitoring the actions, policies, practices, and decisions of corporations, their agents, and affected stakeholders. Corporate governance practices are affected by attempts to align the interests of stakeholders. Interest in the corporate governance practices of modern corporations, particularly in relation to accountability, increased following the high-profile collapses of a number of large corporations during 2001–2002, most of which involved accounting fraud; and then again after the recent financial crisis in 2008.

Finance is a field that deals with the study of investments. It includes the dynamics of assets and liabilities over time under conditions of different degrees of uncertainties and risks. Finance can also be defined as the science of money management. Market participants aim to price assets based on their risk level, fundamental value, and their expected rate of return. Finance can be broken into three sub-categories: public finance, corporate finance and personal finance.

Governance is all of the processes of governing, whether undertaken by a government, a market or a network, over a social system (family, tribe, formal or informal organization, a territory or across territories) and whether through the laws, norms, power or language of an organized society. It relates to "the processes of interaction and decision-making among the actors involved in a collective problem that lead to the creation, reinforcement, or reproduction of social norms and institutions." In lay terms, it could be described as the political processes that exist in between formal institutions.