A clearly defined corporate governance structure promotes transparency and fairness, helping your business to build strong relations with its shareholders as well as the local community. It helps define roles, assures accountability, and allows for compliance with laws and regulations. It also supports a company’s long-term growth plan by aligning the interests of shareholders with the interests of the board as well as management.
Corporate governance is a complicated concept that is dependent on the goals and culture of your business. Some of the most important concepts to keep in mind are:
Unitary Board Structure
In this system of corporate governance, the board of director is responsible for making decisions and oversight of company activities. The board is comprised of non-executive and executive directors. This type of structure is common in small and mid-sized companies.
Continental Model
A two-tiered system, called the Continental model gives control to a management board as well as an oversight board. The management board is made up of insiders within the company including managers and executives. The supervisory board is comprised of outsiders like bankers and union representatives with stakes in the company.
Stakeholder-Oriented Governance
Unlike traditional structures that prioritize shareholder interests, this type of governance structure is designed to consider the requirements of all stakeholders including customers, employees as well as vendors and the general public. It encourages boards of directors to adopt policies that address environmental and Due Diligence social concerns and to create engaging programs that are meaningful. The board should be transparent and transparent about its decision-making process and communicate this information to all stakeholders. It must also ensure that there are clear lines of communication between management, the board and shareholders.
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