An important strategic planning step for the organization going through transformation is to understand the concept of corporate governance. Corporate governance is one of those terms that most managers use but few can define precisely. Corporate governance is about how the organization achieves its purpose. It involves the meaning of organizations and how organizations fulfill their purpose. It has elements of leadership, stewardship, ethics, security, vision, direction, influence, and values.
Corporate governance is about protecting stakeholder interests in the organization.
Customers have needs to be met, and organizations are a means of organizing the diverse elements required to meet those needs efficiently and effectively. All forms of organizations exist to serve a purpose of creating value to meet the expressed or perceived needs of their customers. For-profit organizations have an additional complexity in the concept of ownership interests. Ownership is a common trait of all organizations, but it is more forceful in for-profit ones. One of the ways managers can come to grips with corporate governance concepts is through a model such as the Governance Loop.