Corporate governance plays a vital role in ensuring accountability, transparency, and effective management within a parent company and its subsidiaries. It refers to the system of rules, practices, and processes by which a company is directed and controlled. For a parent company, corporate governance ensures that strategic decisions align with the interests of shareholders while managing the performance and risks across its corporate structure.

A strong governance framework helps the parent company oversee its subsidiaries responsibly, maintaining control without excessive interference in day-to-day operations. It establishes clear lines of authority, decision-making protocols, and reporting mechanisms, reducing the risk of mismanagement or legal exposure.

Corporate governance also fosters ethical behaviour, compliance with regulatory standards, and proper disclosure of financial information. It helps prevent conflicts of interest, especially when subsidiaries operate in diverse markets or industries. The board of directors in the parent company typically plays a key role in setting governance policies, overseeing executive performance, and approving major decisions involving subsidiaries.

Ultimately, effective corporate governance enhances investor confidence, protects stakeholders, and supports long-term value creation. In complex corporate groups, it ensures consistency, discipline, and alignment across all levels, helping the parent company fulfil its responsibilities while optimising overall business performance.