Good corporate governance begins with a great board of directors. Organizations must ensure that individuals that represent all shareholders’ interests are independent and well-experienced. Good governance is the glue that holds together business practices while providing positive workplace management and sustained financial performance. In this article at Governance Today, Mark Schultz explains the foundation and pillars of good governance.
The Pillars of Good Governance
Accountability embraces ownership of the strategy required to attain organizational goals. When the idea of accountability is approached with a positive outlook, people will be more open to improving their performance. Accountability also includes fostering a culture of compliance within internal and external boundaries.
Transparency is a critical component of corporate governance. This is because the disclosure of an organization’s performance and activities in a timely and accurate manner ensures that all stakeholders have access to clear and factual information. This makes the process and transactions verifiable, and the enterprise can provide a clear answer if a question comes up about an action taken.
“The board is responsible for these key strategic issues and for proving leadership in establishing the right culture to drive the performance of the business,” explains Schultz. Without a clear direction, no organization will realize its long-term goals and potential.
Board members must identify key stakeholders and how they interact with the business. This helps those charged with governance to ensure the best outcome for the organization. Stakeholder engagement must be included in the strategic plan.
Boards must be responsible for effective oversight and governance of risks. The members must make a thorough, integrated, and thoughtful approach to understanding, quantifying, overseeing, and identifying risks that have the potential to affect shareholder value in the long term. Boards must communicate their risk oversight approach to shareholders through their normal course of business.
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