A clearly defined corporate governance framework ensures transparency and fairness, helping your company cultivate an enduring relationship with shareholders and other members of the community. It defines roles, provides accountability, and allows for compliance with laws and regulation. It also supports a company’s long-term growth plan by aligning the interests of shareholders with the interests of the board as well as management.
Corporate governance is a complicated concept that is dependent on the mission and culture of your company. The most important things to keep in mind are:
Unitary Board Structure
In this model of corporate governance, the board of directors is responsible for making decisions as well as overseeing the activities of the company. The board comprises non-executive and executive directors. This type of structure is common in mid-sized and small businesses.
Continental Model
A two-tiered structure, the Continental model gives control to a management board and the supervisory board. The management board is comprised of insiders from the business including executives and managers. The supervisory board comprises outsiders such as bankers and union representatives who have stakes in a company.
Stakeholder-Oriented Governance
Contrary to traditional structures that focus on shareholder interests, this type of governance structure considers the needs of all stakeholders including customers, employees, vendors and the community. It encourages boards of directors to adopt policies that reflect social and environmental issues and develop engaging programs that are meaningful. The board must be transparent about the process of making decisions and share that information with all stakeholders. It should also ensure that there are clear lines between the board, management and shareholders.