Association of Chartered Certified Accountants (ACCA) Certification Practice Test

What is the ultimate goal of good corporate governance?

1. To minimize operational costs

2. To ensure shareholder interests are prioritized

3. To comply with all government regulations

4. To create a competitive company culture

The correct answer is: To ensure shareholder interests are prioritized

The ultimate goal of good corporate governance is to ensure that shareholder interests are prioritized. This concept encompasses a framework of rules, practices, and processes by which a company is directed and controlled, ultimately aiming to safeguard the interests of shareholders while also taking into account the interests of other stakeholders, such as employees, customers, suppliers, and the community. Effective corporate governance provides a structure through which company objectives are set and performance monitored, thus promoting transparency, accountability, and ethical behavior at all levels of the organization. Prioritizing shareholder interests is fundamental because shareholders invest in the company with the expectation of returns; hence, good governance practices help in enhancing shareholder value, fostering trust and confidence in the company's management and performance. While minimizing operational costs, complying with government regulations, and creating a competitive company culture are important considerations for any business, they are not the primary aim of corporate governance. Instead, these factors are often influenced by how well corporate governance is implemented, as strong governance can lead to better operational efficiencies, compliance with laws, and a positive organizational culture that supports long-term success and shareholder value.