Corporate governance is a system of relationships, defined as the structures and processes for the direction and control of companies. These structures and processes involve the relationships among the management, the Board of Directors, controlling shareholders, minority shareholders and other stakeholders.
Good corporate governance contributes to competitiveness, facilitates corporate access to capital markets, and thus helps develop financial markets and spur economic growth. Improvement in corporate governance practices can improve the decision-making process within and between a companies governing bodies, and should thus enhance the efficiency of the financial and business operations. Better corporate governance also leads to an improvement in the accountability system, minimizing the risk of fraud or self-dealing by company officers. An effective system of governance should help ensure compliance with applicalbe laws and regulations, and further, allow companies to avoid costly legislation. Also, companies should stand to benefit from a better reputation, both at home and in the international community.
IFC is a leader among multilateral financial institutions in integrating corporate governance considerations into all phases of the investment process. IFC’s long history of practical experience structuring investments, appraising investment opportunities and nominating Supervisory Board members has allowed it to put corporate governance principles into action.
A focus on good corporate governance practices in client companies allows IFC to add value to its clients, reduce its investment risks, avoid reputational risks, and contribute to the development of the capital markets in its countries of operation.
