A well-defined corporate governance system is a great way to ensure transparency and fairness as well as helping your business develop a an excellent relationship with its shareholders and the community. It helps define roles, ensures accountability, and allows for compliance with the law and regulations. It also supports a business’s long-term growth strategy through aligning shareholder interests with the interests of the board and management.
Corporate governance is a complex concept that is based on the objectives and the culture of your company. Be aware of the following key concepts:
Unitary Board Structure
In this corporate governance system the board of directors is accountable for overseeing and making decisions regarding corporate activities. The board consists of both executive and nonexecutive directors. This type of structure is typical in mid-sized to small businesses.
Continental Model
A two-tiered model, the Continental model gives control to a board of management and an oversight board. The management board consists of employees from the company including managers and executives. The supervisory board consists of outsiders, like bankers who have stakes in the company.
Governance that is based on stakeholder involvement
This type of governance structure is different from traditional structures that focus on shareholder interests, is a holistic approach that considers all stakeholders, including employees vendors and customers, as well as the community. It encourages directors to adopt policies which reflect environmental and social concerns and develop relevant engagement programs. The board should be transparent about its decision-making process and communicate this information to all stakeholders. It is also important to ensure that there are clear lines between the management, the board and shareholders.
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