Corporate Governance Tips

Corporate governance is an established set of rules, procedures, and relationships that an organisation uses to run its business. Its aim is to ensure that the company is managed in a responsible manner and with clear responsibilities to shareholders and stakeholders.

A well-functioning corporate governance structure plays a crucial role in the overall success of a company. Transparency and accountability as well as fairness are its elements. These principles can help businesses avoid embarrassing scandals, encourage growth and build trust with employees, lenders, and investors.

Concerns over corporate governance are a subject that can wax and then fade. However, the media’s attention to revelations of malfeasance could rekindle the interest. In actual fact the Enron scandal and other misdeeds at the turn of the 21st century were one of the main reasons behind the Sarbanes-Oxley Act and subsequent increased the requirements for oversight for publicly traded companies.

The best method to prevent corporate governance issues is to ensure there is a formal and transparent procedure for the appointment and nomination of board members. It is imperative that a board adopts guidelines that allow the directors to leave if they do not get a majority vote. The board should also establish an official position for a lead director (also known as a presiding Director) to act as an independent leader.

Additionally, a board must make sure that it has a sufficient diversity in regards to gender, age and ethnicity. This is essential to ensure that the board is able to represent the interests and concerns of all stakeholders, while also protecting against unconscious bias.

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