A clearly established corporate governance structure can promote fairness and transparency, which helps your business to build solid relationships with its shareholders and the local community. It helps define roles, assures accountability, and allows for compliance with laws and regulations. It also supports the long-term growth of an organization by ensuring that shareholders and management have the same interests.
Corporate governance is a complicated concept that is based on the objectives and the culture of your company. Be aware of the following fundamental concepts:
Unitary Board Structure
In this corporate governance model the board of directors is accountable for making decisions as well as overseeing the company’s activities. The board comprises non-executive and executive directors. This is a common structure in mid-sized to small businesses.
Continental Model
A two-tiered system, the Continental model gives control to a management board as well as the supervisory board. The management board is composed of insiders from the company including managers and executives. The supervisory board is comprised of outsiders like bankers and union representatives who have stakes in a company.
Stakeholder-Oriented Governance
In contrast to traditional structures that place emphasis on shareholder interests, this kind of governance structure takes into account the needs of all stakeholders, including customers, employees as well as vendors and the general public. It encourages boards to create meaningful engagement programs and adopt policies that reflect wider environmental and social concerns. The board should be transparent and open regarding its decision-making process and communicate this information to all stakeholders. It should also ensure there are clear lines between the management, board members and shareholders.