The Importance of Good Corporate Governance

Corporate governance is a way to improve transparency, provide guidance to management and align the interests of the business and its shareholders. It builds trust with investors and the community, and can make it less costly to raise capital.

To implement good corporate governance you require a solid team of employees and an effective board of directors. The best boards and teams are diverse, comprising people with different backgrounds, abilities and experience. This diversity is essential to generating creative solutions and ensuring effective decision-making. In addition, it is essential to be transparent in the business process and transactions, as well as the code of ethics that encourages ethical business practices.

Implementing a solid corporate governance model is difficult despite its importance. A variety of regulations and laws has stopped the progress of a thorough discussion. A raucous voice, insurmountable differences between shareholders activists and management, conflicts, and prior staked-out positions have all thwarted it. It’s time to take a new approach.

To ensure that your company has a good corporate governance, it is important that all members of your board are aware of their roles and responsibilities. This requires detailed job descriptions as well as organizational charts and clearly written governance guidelines. You must have a system for regularly reviewing and evaluating the performance of your board.

A sound corporate governance system should have three policies that promote integrity and ethical dealings: A conflict of interest policy, a whistleblower policy and the code of conduct for directors. The majority of governance experts agree that your board should comprise both insiders (major investors and founders) as well as independent members. Independents help in reducing the power balance and provide an outside perspective to your board.

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