Corporate Governance: Conflicts, Mechanisms, Risks, and Benefits

Corporations are complex structures with stakeholders beyond owners, lenders, and managers. Corporate governance involves the creation and maintenance of a system of checks, balances, and incentives that addresses conflicting interests among these stakeholders. In this Learning Module, we first identify key aspects of the relationships between these parties and the potential conflicts that may arise. In the second lesson, we turn to the various mechanisms established to manage these conflicts, settle disputes, and mitigate risk. Finally, we highlight the benefits of strong corporate governance and stakeholder management policies as well as the risks of weak policies and their potential impact on corporate performance.