In a recent post by Diligent, the company outlined eight key ways that companies can harness the power of corporate governance.
Recognising and implementing the best practices in corporate governance can be an essential driver of organisational success. These practices, when executed appropriately, can improve overall performance, build shareholder trust, facilitate strategic planning, enhance risk management, and ultimately steer organisations towards long-term sustainability. Moreover, by adopting good governance, businesses can avoid legal issues and enjoy extensive legal protections.
At the heart of corporate governance lie several key practices. One of the primary steps is to recruit a competent board and align strategies with organisational goals. This should be coupled with a strong emphasis on accountability, high standards of ethics and integrity, clear definition of roles and responsibilities, and effective risk management.
One of the prominent methods of improving board performance pertains to refreshing its composition to better reflect the current economic climate. This involves re-evaluating the nomination and recruitment procedures and establishing nominating and governance committees. More importantly, a diverse board composed of qualified and independent directors offers different perspectives and fosters sound decision-making.
Furthermore, a successful board not only balances skills, governance experience and industry expertise but also cultivates diversity beyond gender, including factors such as age, ethnicity and board tenure. This consideration has gained importance as recent years have seen fewer board appointments, significantly affecting female directors and people of colour.
The new-age corporate governance emphasises onboarding all directors to prepare them for their roles. This involves offering comprehensive orientation, encompassing the organisation’s history, key achievements, as well as a review of the board’s organisational policies and procedures. New board directors should also be acquainted with their legal and fiduciary responsibilities, recent financial statements, meeting minutes, and the annual strategic plan.
As boards take on more responsibilities due to increasing regulatory requirements, effective presentations have become crucial. Corporate governance best practices can help improve the quality of boardroom presentations and ensure comprehensive reporting and oversight.
Furthermore, corporate governance best practices require boards to align strategies with the company’s goals and develop a robust risk management framework. Accountability holds a paramount place in best practices for corporate governance and necessitates strong internal controls and monitoring.
The culture of honesty, integrity, and ethical dealings should be deeply ingrained within an organisation. This can be achieved by creating robust policies that support ethical behaviour, such as a conflict of interest policy, a code of business conduct, and a whistleblower policy.
Lastly, defining distinct roles and responsibilities for the board Chair and the CEO, as well as for all board directors, is a cornerstone of best corporate governance practices. This, along with effective delegation of responsibilities to committees, enhances organisational collaboration and efficiency.
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