Success of a business depends on policies that satisfy the needs and expectations of stakeholders, investors, and managers. Corporate governance is the basis of how companies create and implement their policies. In the age of changing demands and expectations, effective governance is more crucial than ever before.
Corporate governance is only effective when the values, culture and purpose of the company are clearly understood. It also requires systems to ensure a business is able to identify and mitigate risks before they occur. This includes the creation of a code of conduct, a system for reporting and regulating conflicts of interests.
The board of directors must encourage transparency, openness, and accountability to all internal and external stakeholders. The board is accountable for ensuring that the company’s assets are utilized in a manner that creates value for long-term shareholders. This is achieved through an assessment process that involves identifying risks, establishing strategies for managing risk and evaluating the performance against the goals.
Boards should think about appointing a director to lead the board, also known as the director in charge to ensure the independence of board leadership. This is particularly important when the www.theirboardroom.com/board-collaboration-and-communication/ company has a combined chair and CEO position. Boards should include non-management members in evaluations of CEOs, if necessary and assess the overall performance of senior management.
The board should engage regularly with shareholders and other stakeholders regarding issues that affect the company’s value-creation over the long term, even if these stakeholders are not in a position where they can directly influence corporate strategy or decisionmaking. It is important to encourage shareholders who want to influence corporate decisions to publicly disclose their ownership and identity when federal securities laws allow it.