Types of Corporate Governance

Corporate governance is the rules of conduct that keep companies out of trouble. In the news, you hear about companies with poor corporate governance. Corporate policies for governance establish clear lines of authority, which minimize the chance of financial loss, waste, risk and corruption. They help the business achieve its goals in business while also creating value for shareholders and employees.

Small companies need strong corporate governance as just as large companies. With established procedures and processes, they can help prevent issues that could erode trust and cause legal or regulatory troubles. Small business owners need a clear structure to guide their expansion. A good board can provide direction and oversight for a growing business.

A solid board of directors will assist a business in avoiding scandals such as the Enron meltdown and subsequent investigation into fraud. The scandals have resulted in stricter requirements for recordkeeping and stiff penalties for violations of securities laws committed by companies.

Corporate governance is a system of checks and balances to minimize conflicting interests between stakeholders and with any stakeholder. It may include the policy on conflicts of interest which requires disclosure of potential conflicts, as well as mechanisms for reporting any violations or alleged wrongdoing.

A well-functioning board can act as a vital link between a company’s its investors, creditors, and customers. It can aid in the creation of value systems that will influence a company in the future and ensure that the management has all the information they require to make informed decisions. It can also help an organization to identify and prioritize the most important elements that will determine its future success.


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