A business’s success depends on policies that serve the requirements of stakeholders, investors and managers. Corporate governance is the foundation for how businesses develop and implement their policies. Effective governance is more crucial now than ever in a world of ever-changing demands and expectations.
Effective corporate governance requires a thorough understanding of the company’s culture, values and mission. It is also necessary to establish systems that allow a company to identify and mitigate risks before they happen. This includes establishing an ethical code of conduct, effective reporting channels and regulating conflicts of interests.
The board of directors has to ensure transparency, openness, and accountability to all internal and external stakeholders. The responsibility of the board is to ensure that the company’s resources are utilized in a manner that create long-term value for shareholders. This is achieved through the process of the identification of risks, the development of strategies for managing risk and evaluating performance in relation to the goals.
Boards should consider appointing a director who is referred to as the presiding director to ensure that the board is independent direction. This is especially important when the company has the dual position of chair and CEO post. Boards should include non-management employees in the evaluations of CEOs, when appropriate and assess the performance of senior management in general.
The board should frequently engage with shareholders and other stakeholders on issues that affect the long-term growth of the company, even if they are not in a position to directly influence corporate strategy or decision making. It should encourage shareholders that want to influence corporate decisions to openly disclose their identity and ownership, where federal securities laws permit it.