The corporate obligation for good corporate governance of an entity is significant due to the ability to improve corporate performance and extensive due to the sheer volume of governance components that must be implemented, executed, monitored, and automated.
On top of that, safeguarding the stakeholder interests requires a clear understanding, commitment to fulfilling the requirements, and understanding of the principles and practices of good governance. Unfortunately, many organisations continue to take the checklist approach that often results in check-the-box exercises to ensure governance compliance without creating any value to the organisation.
At the Global Corporate Governance Day on the 14th of September 2022, we address the ten pillars of good governance as structured guidance for governance accountability, transparency, assurance, integrity, leadership, and overall stakeholder management.
1. Accountability and responsibility
The Corporate Governance Institute recommendations make management accountable.
Corporate governance sets clear rules on the organisation’s structure and accountability. For example, the board must present an accurate and unbiased position of the company. This creates transparency through accountability and clear disclosures and reporting systems that highlight areas for improvement.
The Corporate Governance Institute also guides bribery, anti-corruption, fraud, ‘gift’ restrictions, and CSR/ESG in the corporate governance social responsibility and governance guidelines.
3. Corporate Culture, Ethics, and integrity
As part of the guidance on improving cross-cultural management and promoting inclusion, ethnicity, equality, etc. The Corporate Governance Institute provides guidance to attract and safeguard talent and rewards;
• Are employees paid and rewarded for their efforts?
• Is work-life balance and a work-late culture in the organisation acceptable?
• Is succession planning in place?
These are some questions we ask to avoid high turnover and ensure that training, awareness, and related governance and compliance issues occur.
The Corporate Culture guidance includes ethnicity, diversity, bullying, sexism, or inappropriate behaviour/use of work equipment with strict discipline, punishments, or consequences.
4. Management is effective and efficient.
Corporate governance components improve economic efficiency by holding management accountable. Management decisions go through an assessment and approval process that is critiqued and analysed, reducing the number of bad decisions a firm takes.
Stock-listed companies have additional governance policies that give investors greater insight into how the company functions. Compliance with policies can demonstrate how decisions are made, giving investors confidence that the company is effectively and efficiently run and can document and demonstrate good governance.
6. The rule of law
The comply or explain component ensures that the board of directors are accountable for explaining decisions they have made which are non-compliance or have gone wrong and identifying and addressing the risks to make objective decisions.
7. Stakeholder management
Corporate governance enhances investor confidence and creates a framework by which the business functions and addresses conflict-of-interest issues. As a result, the stakeholders and investors have trust and confidence in the board and management.
Clear responsibilities identify the individuals who make bad decisions that affect the whole company without hiding behind the corporate mask.
Sustainability and how to minimise waste
The Corporate Governance institute guidelines protect integrity and eliminate fraud and corruption. In addition, the procedures help to reduce waste and processes that limit expenses on utilities.
Applicability and appropriateness of transparency is the basic principle of corporate governance. In the long run, transparency creates a constructive relationship between stakeholders and participation in qualitative and quantitative corporate performance. In addition, corporate governance improves transparency and accountability for better decisions that the shares are priced appropriately.
The above ten Corporate Governance pillars must create a roadmap and framework that sets the operational and decision-making foundation. The Corporate Governance framework will form the basis of the governance oversight to administer the actions and decisions of the board, hold management accountable and identify liability for poor choices, and clarify the limits and delegation of authority and the appropriate approval flow in the organisation.
Therefore, drop the checklist approach and structure the corporate governance execution from the governance committee’s charter and composition to implement the pillars to ensure performance and targets to be competitive, operational, reputational, new business opportunities, or regulatory changes.
For further guidance, participate at the annual Global Corporate Governance Day on the 14th of September 2022. Register here.