Corporate governance is a method to increase transparency, provide guidance for management and ensure that the interests of the company and its shareholders. It helps build trust with investors and the public, and can make it less costly to raise capital.
To ensure that your company is running a good corporate governance it is essential to have a strong team of employees and an effective board of directors. The most effective teams and boards are diverse, consisting of people with different backgrounds, abilities and experiences. This diversity is essential to creating innovative solutions and the effectiveness of decision-making. Transparency in business processes and transactions is also important as is a code of ethics conduct that promotes ethical behavior.
Despite its importance, implementing effective corporate governance has proved difficult to attain. A plethora of regulations and laws have stifled progress and sounded a shrill voice. seemingly insurmountable differences between shareholder activists and management conflicts of interest and previously staked-out positions crowding out thoughtful debate. It’s time for a new approach.
The key to achieving effective corporate governance is making sure that everyone on your board understands their duties and responsibilities. This requires detailed job descriptions, organizational charts and clearly written governance guidelines. You need a system to regularly evaluate and review the performance of your board.
A well-functioning corporate governance framework should include three key policies that ensure ethics and integrity. These include A conflict of interest policy along with a whistleblower’s policy and an ethics code for directors. In addition, most governance experts agree that your board should be composed of both insiders (major shareholders and founders) and independent members. Independents can help reduce the power balance and provide an outside perspective to your board.