Corporate governance is the set of policies, structures and procedures that a business employs to manage risk and ensure accountability. Its aim is to provide an outline for long-term success while minimizing the chance of financial loss, waste, risk and corruption.
Fairness, diversity and transparence are the fundamental principles of corporate governance. These principles are derived by the notion that management and the board must treat all stakeholders equally and fairly, including employees and shareholders. This means that you must establish and maintain an official and transparent procedure for selecting, supervising and monitoring key executives and board members’ performance, as well as making sure that the executive compensation and board remuneration with the company’s longer term objectives and providing the required supervision to prevent conflicts of interest.
Transparency means being transparent and willing to share accurate information with all stakeholders including shareholders. This includes the willingness of an organization to disclose both positive and negative news. It also implies publishing this information on regular basis and making it readily accessible.
Depending on the type of business, different boards and committees could play a role in corporate governance. However, it is usually the responsibility of the board members to establish and oversee a formal process for governance. This includes appointing a lead or director as the presiding director, if the structure is one where page the chair and CEO are combined. It should be independent from the chair, and serve on a specific time. The director who is the lead is responsible for implementing the governance policies and procedures that align with the business’s legal, regulatory and cultural environment.
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