Analyse the role of corporate governance in relation to an organisation’s financial planning and control.

Lesson 37/120 | Study Time: Min


Analyse the role of corporate governance in relation to an organisation’s financial planning and control.


🔍 Analyzing the Role of Corporate Governance in Relation to an Organization's Financial Planning and Control

Corporate governance plays a crucial role in ensuring effective financial planning and control within organizations. By implementing sound governance practices, companies can establish a framework that promotes transparency, accountability, and ethical decision-making. Let's delve deeper into the various aspects and implications of corporate governance in relation to financial planning and control.

🏢 The Importance of Corporate Governance:

Corporate governance encompasses the system of rules, practices, and processes through which a company is directed and controlled. It involves the relationships between a company's management, its board of directors, shareholders, and other stakeholders. Effective corporate governance contributes to the overall stability, growth, and success of an organization.

💡 Benefits of Corporate Governance:

1️⃣ Enhanced Financial Planning: Corporate governance frameworks provide guidelines for financial planning processes, ensuring that organizations establish robust budgets, forecast accurately, and allocate resources effectively. This helps in optimizing financial performance and achieving strategic objectives.

2️⃣ Risk Management: Through effective governance, companies can identify, assess, and mitigate financial risks. Governance practices help establish risk management frameworks, internal controls, and compliance mechanisms, enabling organizations to anticipate and address potential financial challenges.

3️⃣ Investor Confidence: Transparent and well-governed organizations inspire confidence among investors. By adhering to strong governance practices, companies build trust, attract investments, and maintain positive relationships with shareholders and financial institutions.

4️⃣ Ethical Decision Making: Corporate governance emphasizes ethical conduct and responsible decision-making at all levels of the organization. This ensures that financial planning and control processes are carried out with integrity, minimizing the risk of financial misconduct or fraud.

🚫 Implications of Non-Compliance:

Non-compliance with the legal framework and weak corporate governance practices can have severe consequences for organizations. Some of the key implications include:

1️⃣ Legal and Regulatory Penalties: Failure to comply with legal requirements can result in fines, legal disputes, and reputational damage. Organizations may face legal actions from regulatory bodies or stakeholders if they breach governance standards.

2️⃣ Financial Instability: Weak governance structures and poor financial control can lead to mismanagement of funds, financial irregularities, and potential bankruptcy. This can result in severe financial losses for the organization and its stakeholders.

3️⃣ Reputational Risk: Organizations with poor governance practices risk damaging their reputation, which can adversely impact customer loyalty, brand value, and market competitiveness. Negative publicity surrounding corporate governance failures can lead to a loss of trust from investors, suppliers, and other stakeholders.

4️⃣ Lack of Investor Confidence: Investors are more likely to invest in organizations that exhibit strong corporate governance practices. Non-compliance or lack of governance can deter potential investors, limiting access to capital and hindering growth opportunities.

🌟 Real-World Example:

One real-world example of the impact of corporate governance on financial planning and control is the Enron scandal. In the early 2000s, Enron, an energy company, collapsed due to accounting fraud and unethical practices. The lack of effective governance mechanisms allowed executives to manipulate financial statements, leading to inaccurate financial planning and control. This ultimately resulted in substantial financial losses for investors and employees, and the company filed for bankruptcy.

📊 In conclusion, corporate governance is vital for an organization's financial planning and control. By implementing strong governance practices, organizations can enhance transparency, mitigate risks, and foster ethical decision-making. Compliance with the legal framework and adherence to sound governance principles are essential for long-term financial stability and the trust of stakeholders.


The importance of corporate governance in financial planning and control




Key principles of corporate governance in financial planning and control

  • Overview of the key principles and best practices of corporate governance

  • Examination of the importance of transparency, accountability, and integrity in financial planning and control

  • Discussion of the role of internal controls and risk management in corporate governance

  • Analysis of the role of ethical standards and codes of conduct in ensuring effective financial planning and control

Corporate Governance: The Keystone to Financial Planning and Control 🏦🗂️

Did you know that the downfall of corporations like Enron and WorldCom was largely due to poor corporate governance? Yes, it's true. Corporate governance acts as a cornerstone for the financial planning and control of an organisation. It is a set of rules, regulations, and systems which set the way an organisation is directed, operated, and controlled.

The Significance of Transparency, Accountability, and Integrity in Financial Planning and Control 🌐🔍

Transparency, accountability, and integrity serve as the three pillars of corporate governance. These virtues are not only essential for the reputation and success of a business but also form the bedrock of financial planning and control.

Consider Berkshire Hathaway, Warren Buffet's multinational conglomerate holding company. Its success is attributed to its commitment to these principles. The company's annual letter to shareholders is an example of high corporate transparency. In it, Buffet openly discusses both his triumphs and failures, a factor that has won the company stakeholders' trust.

The Role of Internal Controls and Risk Management in Corporate Governance 🔐

Internal controls and risk management play an integral part in corporate governance. They help identify, evaluate, and manage the potential risks that can impact an organisation's ability to achieve its objectives. For instance, Wells Fargo, a multinational financial services company, faced a major scandal in 2016 when employees were found to have created millions of fraudulent savings and checking accounts. Severe shortcomings in the bank's internal controls and risk management systems led to this debacle. Hence, robust internal controls and risk management are critical for effective corporate governance.

# Example of Internal controls and risk management

def internal_controls(system):

    if system.errors > threshold:

        trigger_alter(system.errors)

    else:

        continue_operation()


def risk_management(risk):

    if risk.possibility > acceptable_risk:

        take_preventive_measures(risk)

    else:

        proceed_with_cautious_optimism()


Ethical Standards and Codes of Conduct: The Key to Effective Financial Planning and Control 📜⚖️

Ethical standards and codes of conduct play a pivotal role in ensuring effective financial planning and control. They guide the behaviour of the organisation and its employees and set the tone for the organisational culture.

Take Johnson & Johnson (J&J) as an example. The company is renowned for its 'Credo', a guiding document that lays out its commitment to customers, employees, communities, and shareholders. In 1982, when seven people died after consuming cyanide-laced Tylenol capsules, J&J, the producer of Tylenol, swiftly pulled 31 million bottles off the shelves. This decision, guided by their 'Credo', cost the company over $100 million, but it upheld their commitment to customer safety. It's a powerful example of how ethical standards and codes of conduct can guide financial decisions and reinforce trust in the organisation.

To sum up, corporate governance, with its key principles and best practices, is instrumental in an organisation's financial planning and control. Ensuring transparency, accountability, integrity, robust internal controls, risk management, and adherence to ethical standards and codes of conduct can greatly enhance the financial health and reputation of an organisation.


Regulatory framework and compliance in corporate governance

  • Explanation of the legal and regulatory framework governing corporate governance

  • Analysis of the implications of compliance and non-compliance with the legal framework

  • Discussion of the role of regulatory bodies and their impact on financial planning and control

  • Examination of the consequences of non-compliance, including legal penalties and reputational damage

The Intricate Web of Corporate Governance and Regulatory Framework

Did you know that in 2002 the US Congress passed the Sarbanes-Oxley Act (SOX) to increase corporate responsibility, following numerous corporate financial scandals like Enron and WorldCom? This Act highlighted the significance of corporate governance and regulatory compliance in financial planning and control.

Corporate Governance: Corporate governance refers to the system of rules, practices, and processes by which a firm is directed and controlled. It involves balancing the interests of a company's many stakeholders, such as shareholders, management, customers, suppliers, financiers, government, and the community.

The Role of Regulatory Framework in Corporate Governance

Regulatory Framework: This consists of laws and regulations that businesses must follow to ensure their actions are ethical and within legal boundaries. An example is the Securities and Exchange Commission (SEC) in the United States, which enforces regulations on public corporations.

A well-structured regulatory framework is crucial in maintaining high corporate governance standards. It ensures transparency, accountability, and fairness, which are crucial for maintaining investor trust. This trust is key in attracting investment and supporting the financial growth of the organization.

For instance, the SEC requires public companies to disclose financial and other significant information to the public. This allows investors to make informed decisions on whether to invest or not.

The Implications of Compliance and Non-Compliance

You might be asking yourself, "What happens if a company doesn't comply?" or "What are the benefits of compliance?"

Compliance: Compliance refers to conforming to a rule, such as a specification, policy, standard, or law. For instance, a company in compliance with SOX would have a robust internal control system that reduces the risk of fraudulent financial reporting.

Compliance with corporate governance regulations not only prevents legal issues but also boosts a company's reputation, which can lead to increased investment.

Non-Compliance: On the other side of the coin, non-compliance can lead to severe penalties and damage to a company's reputation. A famous example is the Volkswagen emission scandal in 2015. Volkswagen had installed software in diesel engines to cheat on emission tests. The fallout was catastrophic – fines totalled $33 billion, the CEO resigned, and the company's reputation was severely damaged.

The Impact of Regulatory Bodies on Financial Planning and Control

Regulatory Bodies: Regulatory bodies like the SEC or the Financial Conduct Authority (FCA) in the UK play a significant role in financial planning and control. They enforce regulations that companies must adhere to when releasing financial statements, conducting audits, and making financial decisions.

Regulatory bodies promote transparency and honesty in financial reporting, which improves the quality of financial information used in planning and control. They also help prevent fraudulent activities that could harm investors and other stakeholders.

For example, the SEC can impose penalties or sanctions on companies or individuals for non-compliance with financial disclosure regulations, thus ensuring the accuracy and reliability of financial information.

Consequences of Non-Compliance

Non-compliance with corporate governance regulations can have serious implications, including Legal Penalties and Reputational Damage.

Legal Penalties: Companies that fail to comply with regulations can face hefty fines, sanctions, or even dissolution. For instance, Enron's non-compliance with accounting standards led to its bankruptcy and dissolution.

Reputational Damage: Breaching corporate governance regulations can severely damage a company's reputation, leading to a loss of customer and investor trust. It can also lead to a decrease in stock prices, as seen in the Volkswagen emission scandal.

In conclusion, a robust regulatory framework, compliance, and the presence of regulatory bodies play a crucial role in maintaining high standards of corporate governance. This is vital in financial planning and control, leading to the financial growth and sustainability of organizations.


Stakeholder perspective in corporate governance and financial planning

  • Analysis of the role of stakeholders in corporate governance

  • Examination of the interests and expectations of different stakeholders in financial planning and control

  • Discussion of the importance of stakeholder engagement and communication in corporate governance

  • Evaluation of the impact of stakeholder perspectives on decision-making and financial outcomes

The Role of Stakeholders in Corporate Governance

You may be familiar with the infamous corporate scandal involving Enron Corporation. The horrific downfall of this once reputable corporation was largely due to the absence of stakeholder perspective in its corporate governance. Stakeholders, who include everyone from shareholders to employees to customers, play an essential role in corporate governance. They have the ability to influence the company's objectives, policies, and day-to-day operations.

For instance, shareholders, as the primary financial stakeholders, can exert their influence through voting rights. They have the power to elect the board of directors, approve budgets, and steer the direction of the company. Similarly, employees, as internal stakeholders, can shape the company's culture, productivity, and efficiency.

Let's take the example of Google. The tech giant's employees have significant say in the company's operations, demonstrated by the walkouts staged by Google employees worldwide in 2018, protesting the company's handling of sexual harassment allegations. This active participation of employees has undoubtedly shaped Google's corporate governance policies over the years.

Stakeholder Interests and Expectations in Financial Planning and Control

Stakeholder engagement is crucial in financial planning and control. Each stakeholder has different interests and expectations which should be considered in financial planning.

For instance, shareholders are chiefly interested in the company's profitability and sustainable growth, which directly impacts their dividends and stock prices. On the other hand, employees might be more focused on job security, salary increments, and better working conditions. Suppliers would be interested in timely payments while customers might prioritize affordable pricing and quality of products or services.

Take for example Amazon Inc. In 2019, Amazon announced its plans to invest $800 million to make one-day shipping the standard for Prime members. While this move was seen as beneficial to customers, it raised concerns among investors about the impact on Amazon's profitability.

Stakeholder Engagement and Communication in Corporate Governance

In the realm of corporate governance, stakeholder engagement is not an option - it's a necessity. Active engagement and communication with stakeholders can prevent misunderstandings, foster trust, and pave the way for successful financial planning.

For example, Tesla Inc, under Elon Musk's leadership, is known for its proactive stakeholder engagement. From regularly updating shareholders about the company's financial health to Musk personally responding to Tesla owners' concerns on Twitter, this continuous engagement has played a significant role in Tesla's success story.

Impact of Stakeholder Perspectives on Decision-Making and Financial Outcomes

The perspectives of stakeholders can greatly influence decision-making and financial outcomes. If stakeholder interests are not considered, it can lead to poor financial performance, reputational damage, and even legal troubles.

Consider the case of BP's Deepwater Horizon oil spill in 2010. This disaster resulted from a lack of consideration for environmental and community interests, leading to one of the largest corporate settlements in history - $4.5 billion in fines and penalties.

In conclusion, the stakeholder perspective is crucial in corporate governance and financial planning. It shapes the direction of the company, influences financial planning and control, fosters effective communication, and heavily impacts decision-making and financial outcomes


Corporate governance and financial planning in different organizational structures


  • Comparison of corporate governance practices in different types of organizations (e.g., public companies, private companies, non-profit organizations)

  • Analysis of the challenges and opportunities of corporate governance in different organizational structures

  • Discussion of the role of corporate governance in mergers and acquisitions and other strategic transactions

  • Examination of the impact of corporate governance on financial planning and control in international and global organizations

The Symbiotic Relationship Between Corporate Governance and Financial Planning

Corporate governance is akin to the nervous system of an organization — it regulates the operations, provides oversight, and ensures that the entity is functioning in a healthy and productive manner. The heartbeat driving this system? Financial planning and control.

For instance, Apple Inc., one of the world's most successful public companies, attributes much of its success to its strong corporate governance and effective financial planning.

Comparison of Corporate Governance Practices in Various Organizations

Public Companies

Within public companies, such as Microsoft, corporate governance plays an instrumental role. Shareholders, board of directors, and management all dance in a delicate balance. The board - selected by shareholders - oversees management, which in turn runs the day-to-day operations. Robust corporate governance ensures this dance is graceful and productive.

Example: Microsoft constantly evaluates its business strategies and financial planning under the watchful eye of its board of directors, ensuring it remains competitive in the rapidly evolving tech industry.

Private Companies

In private companies like Mars Inc., corporate governance might seem less formal, but it is no less important. While private companies aren’t accountable to public shareholders, they still have a duty to their stakeholders - employees, customers, and investors.

Example: Mars Inc., a famously private family-owned business, attributes its long-term success to its strong corporate governance, which enables it to focus on long-term growth rather than short-term profits.

Non-Profit Organizations

Non-profit organizations like American Red Cross also rely on corporate governance, albeit with a slightly different focus. Here, governance ensures that the organization is operating in line with its mission and is using its resources effectively.

Example: American Red Cross' corporate governance ensures that a maximum percentage of donations go towards their mission rather than administrative costs.

Corporate Governance Challenges and Opportunities in Different Organizational Structures

Corporate governance isn’t one-size-fits-all. For instance, in public companies, a primary challenge is balancing the often conflicting interests of stakeholders. On the other hand, non-profit organizations might grapple with maintaining transparency and accountability. Yet, there are opportunities too. Good governance can build stakeholder trust, attract investments, and guide strategic direction, providing a competitive edge.

The Role of Corporate Governance in Mergers and Acquisitions

Corporate governance is crucial during mergers and acquisitions, acting as the compass that navigates these complex transactions.

Example: When Facebook acquired WhatsApp, strong corporate governance was critical in the negotiation, planning, and execution of the deal, ensuring a smooth transition and integration.

Impact of Corporate Governance on Financial Planning and Control in International Organizations

In multinational corporations like Coca-Cola, corporate governance becomes even more crucial. It helps in risk management, ensures compliance with diverse international laws and regulations, and informs financial planning and control.

Example: Coca-Cola's global corporate governance policies guide its operations in over 200 countries, ensuring it remains a universally trusted and respected brand.

In conclusion, corporate governance plays a pivotal role in an organization’s financial planning and control. It shapes strategic decisions, guides operational activities, and ensures fiscal responsibility and accountability.


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1- Introduction 2- Organisational structures: Understand different types and their financial reporting requirements. 3- PESTEL analysis: Explain and apply to analyse external factors affecting organisations. 4- Introduction 5- Macroeconomic factors: Understand the key factors and their impact on organizations. 6- Microeconomic factors: Understand the key factors and their impact on organizations. 7- International business environment: Understand the significance of macro and microeconomics in an international context and their impact on organization. 8- Introduction 9- Mathematical Accounting Methods. 10- Use mathematical techniques in accounting. 11- Create and use graphs, charts, and diagrams of financial information 12- Apply statistical methods to provide financial and accounting information. 13- Introduction 14- Financial Accounting: 15- Inventory valuation methods and calculations 16- Year-end adjustments and accurate accounting 17- Preparation of final accounts for sole traders and partnerships 18- Assessment of financial statement quality 19- Introduction 20- Budgeting: Understanding the role of budgeting, preparing budgets accurately, and analyzing budgets for organizational performance. 21- Standard Costing: Understanding the purpose of standard costing, calculating and interpreting variances accurately, and evaluating the advantages. 22- Capital Expenditure and Appraisal Techniques: Understanding key capital expenditure appraisal techniques, calculating payback, ARR, NPV, and IRR accuracy. 23- Costing Techniques: Differentiating between marginal and absorption costing, understanding job, batch, and process costing methods, using service cost. 24- Introduction 25- Leadership and Management in Accounting: Understand theories, motivation, and teamworking. 26- Introduction 27- Understand theories of finance 28- Discuss a range of financial theories and their impact on business decisions. 29- Analyse the nature, elements and role of working capital in a business. 30- Describe how a business assesses its working capital needs and funding strategies. 31- Analyse the ways in which a business manages its working capital needs Be able to analyse techniques used to manage global risk. 32- Analyse the scope and scale of financial risks in the global market. 33- Analyse the features and suitability of risk mitigation techniques. 34- Evaluate the suitability and effectiveness of techniques used by a business to manage its global risk. 35- Introduction 36- Understand corporate governance as it relates to organisations financial planning and control. 37- Analyse the role of corporate governance in relation to an organisation’s financial planning and control. 38- Analyse the implications to organisations of compliance and non-compliance with the legal framework. 39- Understand the economic and financial management environment. 40- Analyse the influence of the economic environment on business. 41- Discuss the role of financial and money markets. 42- Analyse the benefits, drawbacks and associated risks of different sources of business finance. 43- Be able to assess potential investment decisions and global strategies. 44- Analyse the benefits, drawbacks and risks of a range of potential investment decisions and strategies for a business. 45- Assess the ways in which the global financial environment affects decision-making and strategies of a business. 46- Inroduction 47- Be able to manage an organisation's assets: Analyse assets, calculate depreciation, maintain asset register. 48- Be able to manage control accounts: Analyse uses of control accounts, maintain currency, prepare reconciliation statements. 49- Be able to produce a range of financial statements: Use trial balance, prepare financial statements from incomplete records. 50- Introduction 51- Understand the principles of taxation. 52- Distinguish direct from indirect taxation. 53- Evaluate the principles of taxation. 54- Evaluate the implications of taxation for organisational stakeholders. Understand personal taxation. 55- Analyse the requirements of income tax and national insurance. 56- Analyse the scope and requirements of inheritance tax planning and payments. 57- Analyse the way in which an individual determines their liability for capital gains tax. 58- Analyse an individual’s obligation relating to their liability for personal tax. 59- Explain the implications of a failure to meet an individual’s taxation obligations. Understand business taxation. 60- Explain how to identify assessable profits and gains for both incorporated and unincorporated businesses. 61- Analyse the corporation tax system. 62- Analyse different value-added tax schemes. 63- Evaluate the implications of a failure to meet business taxation obligations. 64- Introduction 65- Understand recruitment and selection: Evaluate the role and contribution of recruiting and retaining skilled workforce, analyze organizational recruitment. 66- Understand people management in organizations: Analyze the role and value of people management, evaluate the role and responsibilities of HR function. 67- Understand the role of organizational reward and recognition processes: Discuss the relationship between motivation and reward, evaluate different. 68- Understand staff training and development: Evaluate different methods of training and development, assess the need for Continuous Professional Development. 69- Introduction 70- Understand the relationship between business ethics and CSR and financial decision-making. 71- Analyse the principles of CSR. 72- Evaluate the role of business ethics and CSR with financial decision-making. Understand the nature and role of corporate governance and ethical behavior. 73- Explain the importance of ethical corporate governance. 74- Explain, using examples, the ethical issues associated with corporate activities. 75- Analyse the effectiveness of strategies to address corporate governance and ethical issues. Be able to analyse complex CSR and corporate governance. 76- Explain how links between CSR and corporate governance provide benefit to the organisation. 77- Make recommendations for improvement to CSR and corporate governance issues. 78- Introduction 79- Apply advanced accounting concepts and principles: Learn about complex topics such as consolidation, fair value accounting, and accounting for derivatives. 80- Critically evaluate accounting standards and regulations: Understand the different accounting standards and regulations, such as IFRS and GAAP. 81- Financial statement preparation and analysis: Learn how to prepare and analyze financial statements, including balance sheets, income statements. 82- Interpretation of financial data: Develop the skills to interpret financial data and ratios to assess the financial health and performance of a company. 83- Disclosure requirements: Understand the disclosure requirements for financial statements and how to effectively communicate financial information. 84- Accounting for business combinations: Learn the accounting treatment for mergers and acquisitions, including purchase accounting and goodwill impairment. 85- Accounting for income taxes: Understand the complexities of accounting for income taxes, including deferred tax assets and liabilities and tax provision. 86- Accounting for pensions and other post-employment benefits: Learn the accounting rules for pensions and other post-employment benefits, including. 87- Accounting for financial instruments: Understand the accounting treatment for various financial instruments, such as derivatives, investments . 88- International financial reporting standards: Familiarize yourself with the principles and guidelines of international financial reporting standards . 89- Introduction 90- Auditing principles and practices: Learn the fundamental principles and practices of auditing, including the importance of independence, objectivity. 91- Introduction 92- Financial data analysis and modeling: Learn how to analyze financial data and use financial modeling techniques to evaluate investments. 93- Capital budgeting decisions: Understand how to evaluate and make decisions regarding capital budgeting, which involves determining which long-term. 94- Cost of capital: Learn how to calculate and evaluate the cost of capital, which is the required return on investment for a company. 95- Dividend policy: Understand the different dividend policies that companies can adopt and evaluate their impact on corporate finance and restructuring. 96- Introduction 97- Tax planning strategies: Learn various strategies to minimize tax liabilities for individuals and organizations. 98- Business transactions: Understand the tax implications of different business transactions and how they can impact tax planning. 99- Ethical considerations: Analyze the ethical considerations involved in tax planning and ensure compliance with tax laws and regulations. 100- Tax optimization: Learn techniques to optimize tax liabilities and maximize tax benefits for individuals and organizations. 101- Tax laws and regulations: Gain a comprehensive understanding of tax laws and regulations to effectively plan and manage taxes. 102- Tax credits and deductions: Learn about available tax credits and deductions to minimize tax liabilities and maximize savings. 103- Tax planning for individuals: Understand the specific tax planning strategies and considerations for individuals. 104- Tax planning for organizations: Learn about tax planning strategies and considerations for different types of organizations, such as corporations. 105- Tax planning for investments: Understand the tax implications of different investment options and strategies, and how to incorporate tax planning. 106- Tax planning for retirement: Learn about tax-efficient retirement planning strategies, including retirement account contributions and withdrawals. 107- Introduction 108- Risk management concepts: Understand the principles and techniques used to identify, assess, and mitigate financial risks. 109- Financial derivatives: Learn about various types of derivatives such as options, futures, and swaps, and how they are used for risk management. 110- Hedging strategies: Analyze different strategies used to minimize potential losses by offsetting risks in financial markets. 111- Speculation strategies: Explore techniques used to take advantage of potential gains by taking on higher risks in financial markets. 112- Regulatory frameworks: Understand the laws and regulations governing the use of financial derivatives and risk management practices. 113- Ethical considerations: Consider the ethical implications of risk management and financial derivatives, including transparency and fairness in finance 114- Introduction 115- Evaluate financial implications of strategic decisions: Understand how strategic decisions can impact the financial health of an organization. 116- Develop financial strategies for organizational objectives: Learn how to create financial plans and strategies that align with the overall goals. 117- Apply financial forecasting techniques: Gain knowledge and skills in using various financial forecasting methods to predict future financial performance. 118- Utilize budgeting techniques in support of strategic planning: Learn how to develop and manage budgets that support the strategic goals of the organization. 119- Consider ethical considerations in financial decision-making: Understand the ethical implications of financial decisions and be able to incorporate . 120- Understand corporate governance in financial decision-making: Learn about the principles and practices of corporate governance and how they influence.
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