What is the function of corporate governance?

Corporate governance refers to the structures, processes, and principles that guide the organization and management of a company, facilitating accountability, fairness, and transparency in a company's relationships with its stakeholders. This framework establishes the distribution of rights and responsibilities among various participants in a company — such as the board of directors, management, shareholders, and other stakeholders — and outlines how decisions are made on corporate affairs.

By providing a structured approach to decision-making, corporate governance ensures that the interests of all stakeholders are considered and balanced, thereby fostering trust and integrity within the organization. This is crucial for sustainable corporate success, as it helps to mitigate risks, enhances the company’s reputation, promotes ethical behavior, and can ultimately lead to improved performance.

In contrast, the other choices do not accurately describe the essence of corporate governance. While company registration is an operational process, it does not capture the governance aspect of oversight and accountability. Similarly, while methods to increase sales revenue and strategies for enhancing employee benefits are important for business operations, they do not encompass the guiding principles and oversight that corporate governance imparts to ensuring a company’s operations align with ethical standards and stakeholder interests.