Corporate governance is the process of setting rules, policies, control and resolutions to promote positive corporate culture and behaviour. It also protects organizations against crises and risks to business like corruption in the leadership and cybersecurity threats. It also provides contingency planning that aids companies in coping with these forces of business and emerge stronger and more resilient.
Corporate governance structures and practices differ depending on a company’s size, industry, ownership structure and the jurisdiction. Despite their differences, these governance structures and practices must have a common goal – constructing value over time for shareholders. They should also permit flexibility to change and adapt their governance practices as needed to meet this goal.
The board of directors of a business is accountable for setting strategic goals, appointing senior management and evaluating them, and representing the shareholders’ interests. Board members must be aware of their responsibilities, and work with management to carry out their duties in a manner that aids the development of the business as well as financial performance.
Stakeholders should be encouraged be involved in shareholder outreach and dialogue with the management and board of an organization. This will allow them to make their views recognized in areas that historically, were within the control of management and the board, such as strategic direction and decisions. In doing so it is crucial for management and the board to be transparent and honest with their stakeholders about their governance structures and practices and their motivations for using them.