What is the primary purpose of corporate governance?

The primary purpose of corporate governance is to ensure accountability and fairness in a company's relationships with its stakeholders. This involves establishing frameworks and practices that guide the company’s operations and decision-making processes to align the interests of various parties, including shareholders, employees, customers, suppliers, and the broader community. Good corporate governance enhances transparency and fosters trust, which are critical for long-term sustainable success.

While ensuring profitability for shareholders is an important aspect of corporate governance, it is not the sole focus. Corporate governance seeks a balance between the interests of different stakeholders rather than prioritizing one group over another. Similarly, managing operational risks is a component of governance, but it does not encompass the broader responsibilities of corporate governance, such as ethical conduct and stakeholder engagement. Maximizing market share may be an objective within a business strategy, but it does not align with the fundamental principles of governance, which center around accountability and ethical considerations. Thus, focusing on accountability and fairness provides a more holistic perspective on corporate governance.