Corporate governance isn’t just for legally constituted corporations. It’s a system that requires the leaders to do more than simply implement well-designed strategies. They must be accountable and fair to all stakeholders. Regardless of whether your business has one or many stakeholders–shareholders, employees, clients, students or the community–your company’s approach to governance will change over time and depend on your unique needs and context. But there are some general principles that can be applied to any company, big or small:
Transparency is among the most crucial elements of good corporate governance. This means that your management and board members are transparent with shareholders, auditors and the public regarding financial reporting accounting standards, major decisions, and internal practices. This also means that your organization divulges information regarding its environmental and social impacts in ways that are easily accessible to anyone who might be interested.
Another aspect of corporate governance is establishing clear roles and responsibility for your board. This can be accomplished through job descriptions for your board, its chair and vice chairs committees, chairpersons of the committees or terms of reference (TOR) for directors individually. This ensures a standard list of responsibilities, as well as clear boundaries to delegate and limits on the authority. It can foster a culture of open communication and collaboration and reduce the chance of mistakes and ensure compliance. It could also lead to greater opportunities for growth as your company expands and diversifies.
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