Corporate governance is a set of rules and regulations, set by the management board about the organization’s relation with its stakeholders. Stakeholders are different from the stockholders. Stakeholders include customers, employees, business partners, government and community. In other words, this is all about social relationships. These rules and practices uphold the corporation’s values. These sets of rules can be different from organization to organization.
What are the principles?
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Shareholders are given certain privileges. The shareholders must be given importance and must be allowed to participate in the general meetings.
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Relationships with the Stakeholders other than shareholders must also be maintained.
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The board members and the shareholders must accept similar objectives and a similar vision for the organisation.
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A code of conduct must be laid out for the board and also for the employees.
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The members of the board must share all necessary information with the shareholders. Hidden information can break the trust of the shareholders.
How to improve corporate governance?
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For practising good corporate governance, you need management boards enriched with knowledgable people. The members must be well experienced concerning management and present market conditions. They should manage both internal and external affairs. In larger corporations regular training and updates are provided to the management team by experts.
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The performance of an organisation lies in the hands of the management team. Definite duties must be laid out for each and every member so that the managers can work independently. Each manager is accountable for the duties of their department.
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The organisation must provide whistle-blowing power to everyone.
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You should form a system to evaluate the performance of the management board, at regular intervals.
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The board must produce a list of threats that the organisation is facing or may face in the future. Risk management is an essential work of the board.
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The frequency of board meetings is influenced by the stability/maturity of the corporation and the stability of its markets. Board Meetings allow board members to acquire first-hand information as to what is happening within the organisation. They also allow the various senior managers to share their view.
References
- Why is Corporate Governance Important?
- A Survey of Corporate Governance Andrei Shleifer and Robert W. Vishny The Journal of Finance Volume 52, Issue 2, Article first published online: 18 April 2012
- Top Ten Steps to Improving Corporate Governance
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