There are certain characteristics that are common to all sound corporate governance structures:
I. The spelling out of the rights of all stakeholders of the firm, particularly shareholders.
The duty to pay dividends is not a core attribute of corporate governance. For instance, shareholders rights could be served just as well if the firm repurchases its share instead of paying dividends.
I. An effective corporate governance system should minimize the likelihood that a firm will go bankrupt.
The likelihood of bankruptcy is determined by the operational and financial risk of the company. While an effective corporate governance system will reduce the likelihood of fraud committed on the part of management, it does not necessarily mean that it will save a firm from going bankrupt.