Corporate governance goes beyond simply checking boxes. They are an established set of guidelines that assist companies in performing better and establish trust with shareholders and other stakeholders. They serve as a guideline for the company’s success. They can be utilized next by small or large businesses, public or privately owned, and by all types of companies.
Good governance starts with the people. Boards must pick the right candidates, create a clear recruitment process and ensure that their employees are completely engaged in the task. They must also ensure that they have the skills to review management practices effectively.
The next step is to create an arrangement of checks and balances that eliminate conflicts of interests. This involves establishing the code of conduct for directors of the board, audit committee and the compensation committee, as well as having policies in place that promote transparency and integrity, as well as ethical conduct.
In addition boards should have an established leadership structure and an independent director who is the lead. This is critical regardless of whether the board blends the positions of chair and CEO or has a separate chair. A strong, independent presiding director can be key to establishing a culture of cooperation and consensus in the boardroom.
Finally, the best practices in governance require boards to communicate regularly and transparently with their shareholders and other stakeholders. This includes making their financial statements and other information easily accessible. It also includes regularly updating their information on new or changing governance principles and encouraging dialogue with stakeholders.
