Relationship between Management & Governance ~ Corporate Governance

For a preliminary understanding of the scope of corporate governance, it can be assumed that what a Board of Directors of a company does to ensure a proper conduct of its affairs is called Governance while what is done by the employees hired by the Board to operate the company’s affairs on a day to day basis is called the Management of the Company. The following figure explains the relationship between governance and management of a company.

Another way of looking at these terms is in relation to the functions performed by each group, namely the governors (i.e. the directors) and managers. Essentially, there are four functions involved in running any organization namely planning, leading, organizing and controlling. Both the directors and management perform all these four functions; however their respective involvement is at different levels, as depicted in Fig. 

The Board of Directors, responsible for governance of the company, looks after the following matters without being directly involved in routine affairs of the company:

• Strategic, i.e. long term, management of the company;

• Setting overall objectives of the company;

• Approving plans (including budgets) for achieving these objects;

• Arranging resources for the conduct of the company’s business.

• Defining rules and parameters within which the management of the company may operate;

• Protecting the interests of all stakeholders;

The above functions have been discussed in detail in subsequent chapters of this book.

The Management, comprising of executive directors and senior managers of the company, looks after the following matters:

• Conducting day to day affairs of running the company’s business;

• Attending to all operational matters and coordinating the various activities of the business;

• Implementing the plans approved by the Board of Directors;

• Developing proposals, suggestions and alternatives for consideration by the Board of Directors.