The Importance Of Corporate Culture And Corporate Governance

Corporate Culture and Governance

A company’s culture helps to define who that company is. The culture within a company is influenced by the values, morals, and behavior set by management and the board of directors (Cohen, 2015, p. 347). A company’s culture helps to define a company’s corporate governance (p. 347). The culture lays out the corporate governance of an organization, it sets the tone for the business (p. 347). Enofe, Amaria, and Hope (2012) express that corporate culture is the personality of your company (p. 92). In addition, the authors note corporate culture is defined as “the shared values, traditions, customers, philosophy, and policies of a corporation; also the professional atmosphere that grows from this and affects

1145). Corporate culture and corporate governance are essential for companies to help prevent fraud from taking place. Corporate governance, according to Krechovska and Prochazkova is an essential part of everyday business, meaning that every company or business organization should establish a governing body that guarantees daily business operations are running appropriately (p. 1145). Corporate governance is established around the achievement of the goals of the company (Tihanyi, Graffin, & George, 2015, p. 1). In order for a company to be in compliance with the SOX and PCAOB requirements a company must have strong internal controls to prevent misstatements from occurring, and in order for those internal controls to be put into place is for a company to have a strong cultural base and a strong corporate governance (Cohen, 2015, p. 350). Companies who have a strong culture and corporate governance are able to pass along their values and beliefs to their employees and their employees are more likely to be happy and comfortable with their job and less tempted to commit fraud (p.

349). Whereas, Ho (2012) notes the Organization for Economic Cooperation and Development (OECD) defines corporate governance as “a set of relationships between a company’s management, its board, its shareholders, and other stakeholders, as well as the structure through which…the means of attaining corporate objectives and monitoring performance are determined” (p. 464). Corporate governance requires the participation from the board of directors, management, and even shareholders. They are responsible for defining the rules and regulations for decision-making and enforcing those rules (p. 2). Corporate governance is the combination of control functions that work unified in order to control the relations among all of those invested in the company; shareholders, management, and employees (p. 2). Additionally, corporate governance is not just about management and control, it focuses on the moral values, social accountability, worthy occupational practices, and control activities (Minculete & Olar, 2014, p. 97). According to Minculete and Olar, a good corporate governance entails the right “association and combination within the governance of operational terms like internal audit, internal control, external audit, and risk management” (p.