Corporate governance is a set of rules, procedures, and practices that companies use to manage themselves. This governance framework provides the checks and balances to hold companies accountable to their shareholders, employees and other stakeholders.
Different corporate governance models exist in modern business and each one has its own unique impact on the overall effectiveness of a business. Certain governance models focus more on the stock market, while others focus on the company’s customers or employees.
The main responsibilities of the board are driving the company’s long-term strategic plan and ensuring that it is ethically and legally compliant. The board should also oversee management and the CEO. This requires active participation by all directors, as well as the preparation of board meetings.
A structure for committees that is effective allows the board to examine and discuss topics more thoroughly than could be during full-board meetings. The board should decide which committees will perform the functions they are assigned and who will be a part of each committee.
A company’s governance structure should be fair to all its shareholders. This means that it should not take decisions that favor one group of shareholders over the other. Also, it means treating suppliers, vendors and communities equally.
The role of the board in corporate governance differs depending on the industry and the country. In the United States for example, the Securities and Exchange Commission has created a set of best practice guidelines for board members in areas such ESG reporting cybersecurity, cyber security, and governance structures. The SEC’s requirements are complemented by guidance from the top universities around the world for excellence in leadership and management.
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