Corporate governance is the establishment of policies, rules and procedures that govern the company. It also takes into account the interests of the employees, customers, and shareholders and also the government, lenders and the community. These aspects are crucial to an effective and profitable business.
The human element is crucial because it ensures that all employees who are involved in the operation of a company are ethical, skilled, and committed to the goals of the company. This is crucial in a time when people are tired of corruption and is demanding more transparency, equity and accountability.
Having transparent reporting systems is an essential aspect of good corporate governance. This means that boards receive thorough financial reports on a monthly basis that show how the company’s performance and the reasons. It is also recommended for boards to implement checks and balances in order to stop fraud and mismanagement.
Guidelines and policies are also crucial to good corporate governance. They should reflect the company’s culture, align with legislation/regulations and internal policies, and be clearly available to all stakeholders.
One of the most important facets of good corporate governance is having an independent lead director, also known as a presiding director to oversee and direct the board. This is especially important if the structure of a board’s leadership a company combines the roles as chair and CEO, or if there are close personal ties among top leadership. Additionally, a company must make sure that their compensation policies aren’t creating conflicts of interest for directors.