Corporate governance is more than just checking the boxes. They are an established set of guidelines that assist companies in performing better and build trust with shareholders and other stakeholders. They are a guide to a company’s future and can be applied to large or small companies, public or private, and to businesses of all kinds.
Good governance starts with people. Boards must choose the most qualified candidates, establish an efficient recruitment process, and ensure their members are fully engaged in the task. They should also make sure they are able to evaluate management practices effectively.
Next, we must develop a system that will minimize conflict of interests. This means establishing a code of conduct for directors of the board, the audit committee and compensation committee, as well as having policies in place to support transparency, integrity and ethical dealings.
Boards also need a clearly defined structure for leadership and an independent lead Director. This is crucial regardless of whether the board combines the positions of chair and CEO, or has a separate chair. A strong independent presiding director can be key to building a culture of cooperation and consensus in the boardroom.
Finally, the best practices in governance require boards to regularly and openly communicate with shareholders and other stakeholders. This includes making their financial statements and other data readily available. This also involves providing regular updates about the latest governance practices or developments and encouraging a dialog with stakeholders.
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