Corporate governance is more than just checking the boxes. They are an established set of guidelines that assist companies in performing better and establish trust with stakeholders like shareholders and investors. They are a road map for the company’s success. They can be utilized by small or large businesses, public or privately owned, and for all types of businesses.
Good governance starts with people. Boards should select the most suitable candidates, develop a clear process for recruitment and ensure that their members are completely committed to the job. They should also ensure that they have the right capabilities to effectively evaluate management practices.
The next step is to create an arrangement of checks and balances that eliminate conflicts of interests. This means the creation of a code of conduct for directors on boards, audit committees and compensation committees, in addition to having policies in place that support transparency and integrity as well as ethical business practices.
Boards also need an established structure of direction and an independent Director. This is true regardless of whether the board has a separate or a combined chair and CEO. A strong, independent board director can be crucial to creating a culture that fosters collaboration and cooperation.
Lastly, governance best practices require boards to communicate with shareholders and other stakeholders frequently and in a clear manner. It is important to provide their financial statements, as well as other information easily accessible. It also involves providing regular updates on new or evolving governance standards and encouraging dialogue with stakeholders.