What is good corporate governance?

A company’s corporate governance encompasses processes that include:

•     Legal corporate matters
•     Risk and crisis management
•     Workplace ethics and ESG
•     Finances and accounting
•     Employee compensation

By identifying and adopting the traits of good corporate governance, your company can unlock additional opportunities, earn lasting trust with stakeholders, and boost long-term revenue.   

Listen: David W Duffy, CEO of the Corporate Governance Institute, was asked by RTE Radio One to discuss poor governance practices at the Irish state broadcaster. 

While a board of appointed directors is generally responsible for monitoring and fulfilling the most critical requirements of corporate governance, it is equally important to maintain compliance among employees. 

Good corporate governance involves the implementation of rules, controls, policies, and resolutions that encourage positive corporate behaviour and work culture.

Risk management

Companies with good corporate governance should stay vigilant and well-guarded against market volatility. 

Risk management practices include crisis response strategies prepared for internal and external events that often happen with little notice. 

Companies should have contingency plans in place to protect their organisational interest against incidences such as leadership corruption, cybersecurity threats, economic downturns, and political instabilities. 

Leaders of good corporate governance should have the skills, experience, and tools required to identify the biggest threats to the company. 

Subsequently, leaders must have the capability of developing action plans with team members to mitigate the highlighted risks, ideally with the most cost-effective approach.

Depending on the scale of the company, decision-makers may appoint a risk management committee to oversee the planning and execution of crisis mitigation. 

Appointed risk management committee members evaluate a company’s risk details, reviewing, approving, and updating the respective policies established by management for the most positive outcomes. 

Uncompromised responsibility 

An effective board of directors should maintain the responsibility of overseeing business decisions based on the company’s core business values and ethical principles. 

These responsibilities include financial management and other corporate duties based on the best interest of stakeholders and the organisation. 

Most responsible organisations follow a top-down approach regarding ethical practices, where leaders act by example to inspire employees to follow suit. 

Companies with good corporate governance should never be dominated by an individual member’s opinion regardless of their role’s significance and seniority. 

Accountability 

Effective examples of good corporate governance involve the element of accountability. In these instances, decision-makers can confidently justify actions and decisions with reliable data. 

Internal control systems, regular corporate reporting, and corporate responsibility strategies. 

Company policies and practices that promote accountability support an organisation’s long-term sustainability through the following methods:

•     Stay on-trend with rising consumer support for social and environmental causes. The process wins public favour and drives brand interest.
•     Attract top talent by appealing to the principles and ethics of the new generation. 
•     Align policies with industry regulations and laws to avoid costly penalties and legal costs.
•     Plan budgets with cost-effectiveness and reduce unnecessary expenditures. 

Transparency and ethics

Good corporate governance involves regular and transparent communication. 

It is important for team members to maintain open dialogue and mutual trust among contributors. 

Companies with good corporate governance should also uphold the highest standards in ethical practices. Leaders need to create and manage a culture of integrity that discourages corruption and prejudices. 

Therefore, it is essential for organisations to keep up their standards with a series of necessary documents that include the code of conduct, transparent hiring policies, anti-bribery policies, and other official documentation that ensures consistent compliance while preventing corruption and other bad practices that harm the organisation’s reputation.

Applying these documents and the procedures contained within helps companies with the transparent disclosure of confidential information, to the respective channels including stakeholders and members of the public. 

Fairness

Fairly run companies empower team members and contributors through trust and collaboration. 

A company with a fair workplace structure fosters a sense of accountability among co-workers, creating healthy relationships united toward fulfilling common company goals. 

Fairness also ensures that stakeholders and shareholders have an equal output in the decision-making process. 

Board members should always consider the best interest of every contributor within the company, shaping the foundations of a diverse and engaged workforce. 

Fair policies also eliminate counterproductive practices including internal corruption and leadership incompetencies that harm a company’s reputation.   

As a result, individuals are more willing to maintain compliance with company policies. 

The impartiality can help promote a healthy and accepting work culture that connects with external communities such as customers, vendors, and business partners, potentially improving organisational performance. 

Ultimately, a board that provides good corporate governance prepares the company for the uncertainties of the future. 

By safeguarding the organisation against risks, empowering employees through fair workplace practices, and providing uncompromised accountability, board members can minimise the negative business forces and focus on staying competitive in the shifting industry landscape.

To learn more about good corporate governance, download the free brochure below.