A company’s governance involves the relationship between its shareholders members, board of directors and management. This framework aligns the interests of all stakeholders and allows the business to achieve its long-term goals. Corporate governance practices that are effective are built on the principles of transparency, accountability and responsibility, which will help to create trust with investors, employees and customers in addition to fostering an environment that promotes a healthy corporate culture.
A good board of directors is composed of a mix of insiders (major shareholders, founders, and executives) and independent members that do not have close ties to the company. Directors who are outside the company bring fresh perspective and knowledge which can prove beneficial in making business decisions. They also act as a spokesman for the insiders, giving them additional support and insight.
A key element of corporate governance is fairness. This requires that the company treats all shareholders, vendors, and employees equally. This is accomplished by the transparency of information, such as major decisions as well as financial performance and the outcome of meetings.
A well-run board important site will have a mechanism that allows it to evaluate its effectiveness, and the effectiveness of its committees on a regular basis. This can be achieved by self-evaluations and surveys. The board should be evaluating the CEO and senior management on an ongoing basis, and if necessary, take part in their evaluations. The board should also set the standards of conduct for committees, members, and senior management. This will ensure that the leaders of the company and their employees are accountable for their actions.