Governance of Enterprise IT (CGEIT) Certification Practice Exam

What is the primary focus of corporate governance?

1. Maximising technological innovation

2. Maximising shareholder value

3. Minimising operational costs

4. Enhancing employee satisfaction

The correct answer is: Maximising shareholder value

The primary focus of corporate governance is to maximize shareholder value. This focus arises from the responsibility of a company's management to act in the best interests of the shareholders who have invested in the firm's equity. Corporate governance encompasses the structures, practices, and processes that facilitate effective decision-making within the company, ensuring that the interests of shareholders are prioritized and protected. A robust corporate governance framework is essential in aligning the interests of various stakeholders, including management, shareholders, and employees, thereby fostering transparency, accountability, and ethical business practices. The ultimate goal is to create long-term value for shareholders, which involves not only financial performance but also risk management and compliance with legal and regulatory requirements. This overarching objective is critical, as it drives strategic initiatives, operational effectiveness, and overall corporate accountability. While technological innovation, operational cost management, and employee satisfaction are important areas within a corporation, they serve as means to the end of maximizing shareholder value rather than being the primary focus of corporate governance itself.