Best practices in corporate governance are not only for businesses that are legally organized as corporations. They’re a set of guidelines that leaders are required to do more than implement effectively well-thought-out strategic plans. They must also 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 you can apply to any organization, big or small:
One of the most important aspects of good corporate governance is transparency. This means that you must ensure that your management and board members are transparent with auditors, shareholders as well as the public about financial reporting accounting standards, major decisions and internal procedures. This means that your business should make information about its social and environmental impact easily accessible to anyone who may be interested.
Establishing clear roles and responsibilities is a further aspect of corporate governance. This can be done by drafting job descriptions for your board itself as well as its vice chair and chair committees and chairpersons or terms of reference (TOR) for individual directors. This will ensure that there are clear boundaries and limits on authority, as well as an agreed-upon set of responsibilities. It can aid in creating a culture of open communication and collaboration while helping to reduce mistakes and ensure compliance with law. It could result in greater growth opportunities as your company expands.
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