Why you should implement good Governance principles for your business December 14, 2018

Why you should implement good Governance principles for your business

Good corporate governance is a key factor in underpinning the integrity and efficiency of a company. Poor corporate governance can weaken a company’s potential, can lead to financial difficulties and in some cases can cause long-term damage to a company’s reputation.

What are the Principles of Corporate Governance?

Shareholder recognition - this is key to maintaining a company's stock price. More often than not, however, small shareholders with little impact on the stock price are brushed aside to make way for the interests of majority shareholders and the executive board. Good corporate governance seeks to make sure that all shareholders get a voice at general meetings and are allowed to participate.

To provide the foundation for a high-performing organisation - the achievement of goals and sustainable success requires input and support from all levels of an organisation. The Board, through good governance practices, provides the framework for planning, implementation, and monitoring of performance and without a foundation to build high performance upon, the achievement of this goal becomes problematic. Achievement of the best performance and results possible, within existing capacity and capability, should be an organisation’s on-going goal. Good governance should support management and staff to be “the best they can be”.

Ethical behavior violations in favor of higher profits can cause massive civil and legal problems down the road. Underpaying and abusing outsourced employees or skirting around lax environmental regulations can come back and bite the company hard if ignored. A code of conduct regarding ethical decisions should be established for all members of the board.

Helps manage risk - Good corporate governance practices ensure the business stays on top of statutory reporting, annual returns, renewing insurance or licenses, etc. An advisor such as your accountant should hold you accountable and focused on meeting your legal and statutory requirements whilst also helping you see the bigger picture.

Encourages good decision making - If a market shifts or a new trend / opportunity emerges in your business sector, having a robust decision making methodology in your firm can help you to change direction efficiently in order to drive the business forward.

Not sure how to implement best practices for corporate governance? Read more about the elements of corporate governance and browse through the corporate governance courses at London TFE.