A well-defined corporate governance system promotes fairness and transparency as well as helping your business develop a an excellent relationship with shareholders and other members of the community. It defines roles, provides accountability, and allows for compliance with regulations and laws. It also assists in implementing a company’s long-term growth plan by aligning the interests of shareholders with the interests of the board and management.
Corporate governance is a complicated concept that depends on the culture and goals of your company. Some of the most important concepts to be aware of are:
Unitary Board Structure
In this system of corporate governance the board of directors is responsible for overseeing and making decisions about company activities. The board includes both executive and non-executive directors. This type of structure is common in mid-sized or small companies.
Continental Model
A two-tiered system, the Continental model gives control to a board of management and the supervisory board. The management board is comprised of the company’s insiders like Due Diligence executives and managers. The supervisory board consists of outsiders like bankers and union representatives who have stakes in a company.
Stakeholder-Oriented Governance
This type of governance structure, in contrast to traditional structures which prioritize shareholder interests, considers all stakeholders, including employees, vendors and customers in addition to the community. It encourages boards to create engaging programs that are meaningful and adopt policies that reflect the larger environmental and social concerns. The board should be transparent about the process of making decisions and make it available to all stakeholders. It must also ensure that there are clear lines of separation between the management, board members and shareholders.
