Analysis of the Impact of Corporate Governance on Sustainability for BIST Companies

Introduction

The consequence of globalization and the advancement of communication technologies is that every action taken by companies is readily accessible to their consumers. Globalization exerts pressure on companies to act more responsibly, as business transactions are now faster, wider, and more transparent than ever before (Eccles et al., 2014). The need for companies to behave responsibly arises from the possibility of consumer dissatisfaction and activist protests. Therefore, companies in the global economy must operate as open and accountable systems rather than as closed ones. The fundamental imperative for this stems from corporate sustainability and the essential corporate governance required to achieve it (Haywood et al., 2013).

Corporate sustainability ensures the longevity and profitability of organizations. Corporate governance, which seeks to safeguard the rights of the organization's shareholders and promote its economic sustainability, also contributes to corporate sustainability (Ortiz-de-Mandojana et al., 2014). Corporate governance is a system of policies and procedures aimed at safeguarding the long-term interests of an organization's shareholders and ensuring the functioning of the organization (Pintea, 2015).

Effective corporate governance entails setting clear objectives, strategies, and corporate cultures. Managers make decisions that are aligned with the organization's strategy, stakeholder trust increases, and investments can be made in more value-added areas (Sharma, 2014). Good corporate governance practices support the efficient utilization of financial and non-financial resources to generate greater added value, facilitate risk management, and promote risk-based decision-making processes, effective talent management, and successful intergenerational transition (Gnan et al., 2013).

Today, it is imperative that businesses demonstrate responsibility towards society in addition to their profitability, an issue that is being demanded and monitored by stakeholders. Apart from legal obligations, sustainability activities, which can be summarized as the activities carried out by businesses in economic, social and environmental dimensions to benefit all stakeholders, also focus on the healthy transfer of resources to future generations. Debates within this context raise questions about the effectiveness of business management. Although there are numerous studies in the literature on corporate governance, the relationship between sustainability and corporate governance has been explored to a limited extent.