A corporate governance code is a set of guiding principles (i.e., an internal restraint system) whose function is to complement the law (i.e., the external restraint system) and determine the quality of the corporation's strategic, control, and supervisory systems. The collection of principles that comprise the code is intended to define the decision-making system and the status of the various decision-makers who guide the activities of the corporation.
The purpose of the code is to improve the quality of corporate governance in alignment with shareholder interests. Its primary role is to guide the Board of Directors and assess the quality of the board members’ activities It does so by providing tools to supervise and control the corporation’s directorate and management, including by means of sanctions. A corporate governance code is intended to enable the development of tools whose function is to audit and guide management and to monitor business policy implementation through the construction of reliable instruments for financial reporting to shareholders.
A code of corporate governance seeks to ensure both the loyalty of directors to shareholders and their duty to develop policies that will enable the corporation to prosper. The role of the code is to ensure that directors experience minimal conflicts of interest in their work processes so that they can exercise unbiased judgment and, in the event of a conflict of interest, to provide mechanisms and guidelines for their resolution. In addition, the code establishes mechanisms to enable the independence of the directors and ensure adequate remuneration for the performance of their work.