What is Corporate Governance?
Corporate Governance is the pinnacle of any good business. It is a framework that covers both the social and institutional aspects of a business, defining and regulating the relationships between company shareholders, the Board of Directors, management and all key stakeholders.
The way in which the objectives of a business are set out and achieved, is primarily influenced by corporate governance, i.e. How is risk monitored? How will internal performance be optimised?
It acts as a system of principles, policies, procedures, responsibilities and accountabilities that are used and implemented by individuals within the business.
It’s important to remember that corporate governance exists for a reason. It is there as a set of guiding principles to assist organisations in achieving their long-term goals.
The Pillars of Good Corporate Governance
Corporate Governance is a key factor in the underpinning of the integrity and efficiency of a company and the way in which it operates on a daily basis. The four main pillars of good corporate governance create a foundation and comprise:
Accountability
Accountability embraces ownership of strategies required to attain goals and is a key element to a strong organisation. Good Corporate governance requires accountability to be both understood, acknowledged and implemented.
Transparency
Transparency is a critical component or in simpler terms shows that there is ‘nothing to hide’. Transparency can lead to better-informed decisions when it comes to the company’s activities and builds a good reputation.
Integrity
Integrity is the way in which someone behaves in accordance with their own ‘moral compass’, a system of internal and external values. In a regulated environment, loss of integrity can have consequences for individuals and/or the organisation as a whole.
Risk Management
Does your business have an appetite to discuss risk, the potential impacts and how it is reviewed and managed over the year? Effectively, managing risk is fundamental to mitigate potential risks out of your business.
The Benefits of Good Corporate Governance
When an organisation has a good corporate governance framework in place it can provide many direct benefits for both individuals and the company through risk management and streamlined and consistent processes. These benefits comprise:
– Efficient processes
– Visibility of errors
– Reduced operational costs
– Smoother operation
– Assured compliance
– Creates a culture of excellence
– Creates a good reputation
– Creates clarity
– Creates financial sustainability
Why is Corporate Governance Important?
Good corporate governance is a key factor in cultivating a company culture of integrity, essentially leading to a positive, sustainable and financially viable business.
Guidelines exist and are put in place by organisations to increase the accountability of individuals within the business and to mitigate mistakes before they occur.
Having strong policies and practices within a company shows that it is well-managed and that the interests of the management are in the right place. In turn, this leads to good practices and ethical decisions being made, ultimately providing the business with a strong competitive advantage as it can effectively demonstrate this to provide stakeholders as well as existing and prospective clients with confidence that the business offers the highest level of customer care and ensures that the services they provide are delivered professionally, reliably and with complete integrity.
