Corporate governance is a driver of a company’s business and performance, and directors themselves play a key role in defining and maintaining the standard of corporate governance within a company.
What does corporate governance involve?
The term “corporate governance” is broad and includes many components, such as decision making, stakeholder relations, company policy, and frameworks. Essentially, corporate governance is the structures and procedures that set out how a company is directed and controlled. The Australian Securities and Investments Commission (ASIC) provides guidance to help those responsible for a company meet their obligations, make good decisions and act in the best interests of investors. This website is a great resource for company directors who wish to gain a better understanding of what their requirements are under federal government legislation.
Why is corporate governance important?
Corporate governance is essential to ensuring that a business is operating effectively and efficiently. Having a good corporate governance will improve a company’s ability to grow its capital, mitigate the risks associated with operating a business, and provide a safety net for stockholders.
What makes an effective corporate governance structure?
The quickest and easiest way to improve the effectiveness of your corporate structure is to implement a policy of diversity. Studies have shown that boards with greater gender diversity lead to better financial performance. A balanced, competent, and diverse board of directors for a company should look for qualified directors who understand the business and can offer new perspectives.
To provide a solid basis for supervision, the composition of the Board of Directors must be regularly evaluated, monitored, and reviewed to identify shortcomings and make timely improvements. Focusing on long-term value creation is not the only important aspect of a successful board, but boards must make the right decisions for the long-term success of your company and its shareholders. Ethical behaviour should also be promoted through the use of corporate policies and procedures. Regular corporate reporting on the performance of your company’s governance structure and individual directors is key to ensuring your corporate governance remains effective. Providing timely and balanced information to supply transparency to key players in good times and bad times will increase stakeholders’ confidence in the company. This is particularly important where directors have external financial interests that could influence their decisions