Corporate governance is the establishment of rules, practices, and procedures that guide a business. It also considers the interests of employees, customers, and shareholders as well as government, lenders, and community. These aspects are crucial to a flourishing, strong business.
The human element of good governance is to ensure that the people involved in the operations of a company are ethical, trustworthy and committed to the company’s objectives. This is especially important at an era where people are fed up with corruption and demanding more transparency, accountability, and equity.
Having transparent reporting systems is an essential aspect of good corporate governance. This includes ensuring that the board receives complete financial reports on a monthly basis that show how the company’s performance has been and the reasons. It is also recommended for boards to implement the system of checks and balances to avoid fraud and poor management.
Guidelines and policies are an additional important element of a good corporate governance. They should reflect the company’s culture, align with legislation/regulations and internal policies, and be clearly available to all stakeholders.
One of the most crucial aspects of good corporate governance is having an independent director, referred to as a presiding director, to oversee and lead the board. This is particularly important if the board leadership structure of a company combines the roles as chair and CEO or if there is close personal connections among the top leadership. A company must also ensure that its compensation practices don’t cause conflicts of interest between directors.