Good corporate governance is about having the correct policies and procedures in place. It is also about maintaining a culture where good relationships between stakeholders provide positive contributions to the long-term goals of the organisation.
Directors, company secretaries and managers can all make a significant contribution to good corporate governance, Compliance training as part of a learning management system is an excellent way to instill such a culture of cooperation at every level of the organisation…
There are several key areas which contribute to good corporate governance. These include:
- The board – having a board with the necessary skills, independence and commitment to make the right decisions.
- Shareholders – keeping them informed and encouraging their participation through general meetings.
- Other stakeholders – recognising the organisation’s obligations to non-shareholder stakeholders such as employees, suppliers and customers.
- The community – maintaining a policy of transparency and disclosure in every aspect of the organisation from finances to personnel.
A vital element of good corporate governance is goal setting. Having clear, attainable objectives, which everyone in the organisation is aware of and is committed to achieving, will increase the likelihood of those objectives being met, or even exceeded. Strategies should be regularly reviewed and adjustments made to allow for changing circumstances.
Sound budgeting is another factor in good corporate governance. Goals cannot be achieved without the financial resources to make them happen. Budgets can be set as much as five years in advance, although regular review and adjustment will obviously be necessary.
Effective risk management is also an important part of good governance. Minimising risks and identifying opportunities should be an ongoing procedure, backed by sound policies and clear delineation of responsibilities. Risk can come from both internal and external sources and all members of the organisation need to be made risk aware through compliance training.
Another key ingredient in good corporate governance is human resources. Hiring and retaining good employees with the necessary skills, attitude and experience is vital to an organisation’s success. Ongoing human resource management needs to focus on performance management, professional development and succession planning to ensure that vital expertise is retained within the organisation.
An essential element of good governance is consultation with key stakeholders. Fostering relationships of trust and mutual respect with stakeholders is vital if organisational objectives are to be met. Key stakeholders can include government agencies, suppliers, employees and customers.
Finally, upper management performs an important role in good governance by providing leadership. If directors and managers are seen to behave ethically and always in the best interests of the organisation, this example will inevitably be followed by others and will contribute to the evolution of a corporate culture that values ethical decision-making.
As can be seen, good corporate governance is a combination of many different things. At the end of the day, having all these measures in place will not guarantee success, as risk is an inherent part of any business venture.
Achieving good corporate governance will, however, reduce the risks considerably and increase the likelihood of long-term success. It should therefore be the ultimate goal of every organisation.