Corporate governance is the set of procedures, structures and procedures which a company employs to manage risk and ensure accountability. Its aim is to give a plan for long-term success, while also reducing the potential for loss of money, waste, risks and corruption.
Fairness, diversity and transparence are the three fundamental principles of corporate governance. These principles stem from the notion that all stakeholders including employees and shareholders should be treated equally and equally by the management and board. This includes establishing and sustaining an appropriate and transparent process for selecting, overseeing and monitoring important board members and executive performance, as well as ensuring that key executives and board remuneration with the company’s longer term objectives and providing the required oversight to prevent conflicts of interests.
Transparency is about being open and sharing accurate information with all stakeholders, including shareholders. This includes the company’s willingness to provide both good and bad news. This means sharing information frequently and making it available.
Depending on the type of business the various committees and boards might play a part in corporate governance. However, it’s usually the responsibility of the board members to establish and oversee a formal process for governance. This includes appointing the lead or director as the presiding director, if the structure is one where the chair and CEO are joined. It should be independent of chair and serve for a period set by the board. The director in charge must establish governance policies and procedures which are in line with the legal, regulatory and cultural requirements of the company.
