In essence, corporate governance helps to protect stakeholder values and interests by improving performance and holding the organisation accountable.
Major corporate governance issues include:
- Fairness – Stakeholders at all levels should be treated equitably and reasonably. Violations should be redressed effectively.
- Transparency – the organisation should not need to keep secrets. Outsiders should be able to observe the organisation’s transactions and processes.
- Leadership – Corporate governance oversees key strategies and leads a culture to help the business perform at its best.
- Stakeholder engagement – ensuring that significant stakeholders are engaging with the business to position the business for the best possible outcome.
- Accountability – owning and embracing strategies, as well as the tasks needed to achieve the organisation’s long-term goals.
Many associate the idea of corporate governance with publicly traded companies, but many small and medium businesses can also benefit from having a strong corporate governance structure. Corporate governance sets rules – instead of processes – that determine your key personnel’s actions and roles. They typically seek to improve management and reduce legal or ethical issues.
Some examples of this are rules regarding personal use of business funds, what it means to serve on a Board of Directors, conflicts of interest, disbursement of profit, hiring of family members, and information partners, investors, and business owners of key decisions and meetings.
Corporate governance can improve your reputation
By publicising your corporate governance and detailing how your business works, you will likely attract additional stakeholders. This can consist of charities who may be interested in partnering with you and promoting your business, lenders impressed by your internal controls and fiscal policy, government organisations, new employees, members of the media, suppliers, and vendors. The more internal information you can comfortably share, the more transparent your business appears – and this is a great way to boost confidence internally and externally.
Minimise conflict and fraud
Corporate governance can help to reduce major conflicts of interest, as well as potential issues with fraud. For example, by conducting external audits, or requiring multiple approvals when transferring large sums of money, or by forbidding the hiring of family members for significant positions, you can stop potential issues with bad employee behaviour before they arise.
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Other strategic challenges you may be facing:
❖ Internal Systems – ensure that your business can run efficiently and effectively with clear systems. Taking control of your internal processes ensures that company culture is maintained and employees are never left uncertain how to proceed without you.
❖ Outsourcing and Supplier Management – it often makes sense not to do everything in house. Your business can’t always cover every possible area of its operations, so making use of outsourcing and external suppliers can help. Strategising your outsourcing will make sure you maximise value and efficiency.
❖ Legal and Risk – every business faces risks and threats to its operations. It’s important to know how to handle these risks so that you can fall back on your plans if something happens, without having to figure it out on the fly.