The success of a business is contingent on policies that meet the needs and expectations of investors, stakeholders and managers. Corporate governance provides the foundation to determine how companies will set and implement these policies. In an age of new demands and expectations, effective governance is more crucial than ever before.
Corporate governance can only be effective when the culture, values and mission of the company are clearly understood. It is also necessary to establish systems that enable companies to recognize and reduce risks before they occur. This includes establishing an ethical code, effective reporting channels, and regulating conflict of interest.
The board needs to promote transparency, accountability and transparency to all stakeholders both internal and external. The board is accountable for ensuring that the company’s assets are utilized in a manner that provides long-term value shareholders. This is accomplished by an approach of identifying risk, developing and implementation of risk management strategies and monitoring performance against goals.
Boards should consider appointing a director who is referred to as the presiding director for the purpose of ensuring independent board direction. This is particularly important when the company has a CEO and chair position. Boards should also include non-management members in CEO evaluations in the event that it is appropriate, and evaluate the overall performance of senior management.
The board should meet regularly with shareholders and other stakeholders about issues that impact the company’s value creation over the long term, even if these stakeholders aren’t in a position where they can directly influence corporate strategy or decisionmaking. It should also encourage shareholders who wish to influence corporate decisionmaking to disclose their identity and ownership in public, when the law governing securities in the United States permits it.