The Importance of Corporate Governance

Corporate governance is a collection of processes, mechanisms and relationships that govern and operate corporations. The goal of corporate governance is to guarantee that the interests of all stakeholders are taken into consideration: shareholders and customers, senior managers suppliers, financiers and shareholders.

There are a variety of arrangements and businesses will often evolve its governance as it expands. Governance is important to a company regardless of its structure, because it facilitates good communication with owners, which can help improve its performance. Governance is also essential to ensure that the company adheres to its legal obligations and is a crucial aspect of risk management.

A sound, clear and formal board report process will improve the ability of the business to secure investment by providing transparency to investors. It will also decrease the cost of capital as well as the cost of equity. A committee structure that is effective will enable the board to address issues more effectively and efficiently. It will help the board identify and prioritize the most pressing concerns and also provide an avenue for delegating authority to committees or management.

A board should comprise an equal number of executive and non-executive members with different experience. The members must be professional and business-minded with a solid commitment to the business and the ability to debate and challenge. The board must also be able to evaluate the CEO and participate in the evaluation of the senior managers, in the event that it is appropriate.

Written by

Leave a comment