**4. Principles of corporate governance**

The term "corporate governance" can be defined in various ways, but still it keeps common characteristics, regarding the implementation of appropriate system of corporate governance to business; it is necessary to follow formal rules and guidance, specifically for emerging and developing economies that only start realization of innovative methods of management. For that reason, some international organizations provided the guidance on corporate governance that identifies the relationship between shareholders and stakeholders, the requirements on transparency and accessibility of information on a corporation's performance, the distribution and interdependence of responsibilities of officers at differ levels of management and other issues on corporate governance [4–6].

*Principle #1: Providing the foundation for a corporate governance framework*

• To establish the corporate governance framework in accordance with current legal and socioeconomic systems, to ensure and encourage companies to perform transparent and in a social efficient way.


#### *Principle #2: The rights of shareholders*

There are three key players in a corporation: the board of directors, management, and shareholders. The mission of the board of directors is to select a chief executive officer (CEO), to monitor and evaluate the CEO's performance and planning process, to delegate the responsibilities, and making decisions rights to the CEO. Management directed by the CEO is responsible for setting and following a company's strategy, strategic planning, risk management, and financial reporting to the board. Shareholders supply their finance by buying a corporation's stock and receive some financial return, shareholders do not participate in day-to-day management, but they have a right to elect a representative to the board and to be informed on business decisions [3].

As a rule, corporations have obligations to stakeholders, including employees, suppliers, communities, and environments where a corporation operates, and government. Consequently, the board of directors should know who are their stakeholders, what do they know about business, and what do they expect. Generally, the representatives of management act the role of a spokesman to engage stakeholders, to inform them, to share and examine their proposals on business activities, to invite to meetings, to provide a dialog, etc. Employees are the key capital for any business; fair and proper treatment of stuff is critical for any corporation; it is essential to develop and follow a policy regarding employees' regulation, compensation practices, providing social insurance, etc. Corporations should implement a mechanism for employees to inform managers about possible or occurred misconducts without fearing to be dismissed. In additional, a corporation has to be a good citizen of the local, regional, or national community where the company operates, to be responsible for environment and sustainability of the business that can bring short-run benefits as well as long-run. Being economic, social, and environmentally sustainable encourages new stakeholders to participate and helps to build a "sustainable" image of the company. Corporations, like all citizens, should obey the existing legal rules and regulations, to protect its stakeholders and ensure the

The term "corporate governance" can be defined in various ways, but still it keeps common characteristics, regarding the implementation of appropriate system of corporate governance to business; it is necessary to follow formal rules and guidance, specifically for emerging and developing economies that only start realization of innovative methods of management. For that reason, some international organizations provided the guidance on corporate governance that identifies the relationship between shareholders and stakeholders, the requirements on transparency and accessibility of information on a corporation's performance, the distribution and interdependence of responsibilities of officers at differ levels of management

• To establish the corporate governance framework in accordance with current legal and socioeconomic systems, to ensure and encourage companies to perform transparent and in

further development based on a transparent way of doing business [3].

*Principle #1: Providing the foundation for a corporate governance framework*

**4. Principles of corporate governance**

6 Corporate Governance and Strategic Decision Making

and other issues on corporate governance [4–6].

a social efficient way.

• Shareholders have a right to guarantee the methods of ownership protection, transfer their shares, to be informed on the corporation's decisions and performance on a specified basis, to join and vote on the general meetings, elect and dismiss the members of the board, to share in the net profit of a corporation, etc.

#### *Principle #3: The equal treatment of shareholders*


#### *Principle #4: The rights of stakeholders*


#### *Principle #5: Transparency*


#### *Principle #6: The responsibilities of the board*

• The board should perform in the best interest of the company and shareholders; the board should fairly take into account the interests of all shareholders regardless of the size of their shares.


#### **4.1. Discussion**

All the abovementioned principles are required for efficient performance of corporate governance, transparent mechanism of cooperation, and interactions of all participants of corporate governance as shareholders, managers, and stakeholders. At the same time, some issues on implementing those principles can appear in countries with developing or transitional economies, as an uncompleted and still-forming legal system of a country that consists of contradicting rules on corporate governance or even does not include any. As a rule, there are some "gray" gaps (uncertain regulation norms) in the legislation of those countries that are suitable for unfair managers to misuse the current law, that, in turn, makes difficult to develop an efficient corporate governance framework. The solution can be found only in a steady improvement of the legislation in accordance to vital needs of corporations rather than politically beneficial changes.
