Corporate governance is a system that defines the relationships between a company's management and its shareholders in the process of achieving the company's strategic objectives. Good corporate governance is critical for the company's reputation, investor confidence, and long-term success. Transparency, accountability, and fair decision-making processes are among the fundamental principles of corporate governance.

Poor or inadequate corporate governance can create negative effects on the company's reputation and can lead to a loss of investor confidence. For example, mismanagement practices and unethical behaviors within the company can lead to financial scandals or legal sanctions. A good corporate governance structure contributes to both risk reduction and the sustainability of the company. Additionally, a balanced distribution of authority between the board of directors and senior executives also strengthens the company's decision-making processes.