Highlight 26/2023 – Corporate Governance in for-profit and non-profit organizations
Mohammed Al-Khaifi, 12 September 2023
Business organizations play a crucial role in shaping the socio-economic landscape, contributing 72% of GDP in OECD countries with over $1 billion in revenue. These organizations can be divided into for-profit and nonprofit organizations, which work differently with different objectives, structures, and operational models. Nonprofit organizations play a vital role in addressing the delays in government services and ensuring equal distribution of resources. They play a vital role in areas such as education, treatment, disaster services, employment, and development.
The subject of corporate governance for-profit and nonprofit organizations is relevant as they significantly impact society’s progress and welfare, despite their different primary goals and business strategies. For-profit businesses contribute to economic expansion, job creation, and innovation development, while nonprofit organizations indirectly support infrastructure and public services by increasing revenue. Both groups play a significant role in shaping the socio-economic landscape and shaping the lives of citizens.
Corporate governance is a set of rules, regulations, or laws designed to operate and control corporations legitimately. It analyzes and classifies individuals with power, authorization, and accountability, as well as decision-making power. Corporate governance covers both institutional and social aspects of an organization, focusing on important company culture matters such as environmental awareness, ethical behavior, corporate energy, risk management, and compensation. It is based on four main principles: accountability, transparency, responsibility, and fairness.
The Australian corporate governance council defines corporate governance as a framework of processes and systems for controlling and enforcing authority within an organization. The Australian code dispenses eight principles and 38 recommendations as a structure of governance for Australian listed companies.
Corporate governance aims to establish a framework of rules and practices that direct and control the way an organization is managed and operated, promoting ethical behavior. Good corporate governance ensures a solid structure for decision-making, accountability, transparency, and the protection of shareholders’ interests. It also helps avoid scandals, encourage growth, expedite auditing, and tax procedures, and increase donations and corporate reputation.
Mohammed Al-Khaifi, Highlight 25/2023 – Corporate Governance in for-profit and non-profit organizations, 12 September 2023, available at www.meig.ch
The views expressed in the MEIG Highlights are personal to the authors and neither reflect the positions of the MEIG Programme nor those of the University of Geneva.