Corporate Governance is a set of customs, laws, policies, processes and institutions governing the way a company or corporations is administered, controlled or directed. An important part of corporate governance is the nature and extent of accountability of certain individuals in an organization. Corporate governance is also used as a mechanism to reduce principle issue of the working environments.

Corporate Governance also speaks of the relationship of the stakeholders who are involved and the goals for which the corporation is governed. In modern business corporations, the external stakeholders are mainly the shareholders, trade creditors, debt holders, customers, suppliers and communities, who are affected by the activities of the organization. The board of directors, employees and executives are internal stake holders.

Corporate Governance in the United States and European Union has been largely influenced by UK Corporate Governance.

Below are a few UK Corporate Governance reports to take note of:-

The December 1992, Cadbury Report, on Corporate Governance’s financial aspects.

December 1994 Rutteman Guidance and July 1995 Greenbury Report.

June 1998 Hampel Report.

September 1999 Turnbull Report. Guidence for directors on combined code: Internal Control.

January 2003 Higgs Report on the review on effectiveness and role of non executive directors.

Since the Cadbury report much has been written about Corporate Governance, much of this study links corporate structures, corporate performance and top management remunerations. Only a limited number of studies have investigated the implementation of Governance devices in UK firm over a decade. Dedman (2000 & 2003), Conyon (1994) and Dahya et al (2002) all have undergone a massive reorganization due to the governance structures of UK companies.

The above reports on UK corporate governance show that the US Corporate governance (Sarbanes Oxley Act 2002 [SOA]: enacted by the US Senate and the House of Representatives) regulations have been influenced by UK. In the mean while the SOA is accelerating and influencing the development of an EU governance. The commission in return has expressed its concerns about these measures put forward by the US, especially the unnecessary outreach effects of the SOA for EU Auditors and EU companies. The SOA has however been very effective as it brought down major scandals like MCI Inc and Enron Corporations in the US.