What are the best practices in corporate governance?

Corporate governance is a set of rules, policies and procedures that governs and regulate the way businesses operate. The rules, laws and processes of corporate governance are driven and governed by stakeholders, construction of corporation and government regulations. The code of corporate governance as outlined in this article entails adherence to these set of rules, customs, principles and regulations.

Corporate governance practices

Best practices in corporate governance issues enhance the monitoring and controlling of both internal and external operations of an organisation. Internal corporate governance controls include monitoring by board of directors, remuneration, balance of power, internal processes and auditing as well as internal execution of powers. On the other hand, external controls address the rights and interest of stakeholders such as suppliers, shareholders and the community, ownership structures, role and responsibility of directors, transparency, communication and ethical behavior.

Importance of corporate governance

Good execution of duties A best practice in corporate governance is revealed by good execution of duties by directors and officers. This eliminates abuse of corporate power and office such as criminal and corruption activities by corporate officers using the company’s name. It promotes transparency and disclosure of relevant information to stakeholders such as on company goals, decisions and management structure. Accountability Best practices of corporate governance calls for accountability of particular individuals in an organisation who would be answerable to specific issues and processes. Good public image Good corporate governance and accountability promotes a good relationship between the organisation and its stakeholders who are key in determining and shaping its activities. Promoting good communication Best practice in good governance promotes good communication and interaction, thus eliminating communication barriers and segregation. Uniformity in reporting structure It is important because it leads to uniformity in the reporting structure of companies in the same trading sector such as standardising the preparation and reporting of final accounts. Fairness Corporate governance promotes fairness on how organisations interact with the public as well as the treatment of workers by setting standards which should be adhered to. The importance of corporate governance is that, it protects the interest of stakeholders through compliancy such as meeting capitalisation requirements. Employee motivation Best practices in good governance boost the morale of employees hence increasing the organisation’s productivity as well as portraying a good public image. Promote employee loyalty Corporate governance promotes employee loyalty and eliminates cases of fraud and corporate scandals which increases productivity and goodwill.