IT Governance

Poor Corporate Governance Can Kill a Company

Do you want your company to achieve business goals? Implementing strong corporate governance is vital for the efficient functioning of your business. Corporate governance is the cornerstone of any good business. In fact, governance has earned its place as an essential tool in the management and growth of companies. In contrast, poor governance can have disastrous consequences for the business. In this article at Zimbabwe Independent, Kudzai Kuwaza discusses how organizations can be negatively impacted due to corporate governance failures.

Corporate Governance Failures Don’t Happen Overnight

There are several warning signs that companies must make a note of to avoid failures. Companies such as Eron, Cadbury, Xerox, Wal-mart, and Satyam have faced massive failures due to poor corporate governance. Here are some red flags of bad corporate governance that you must never ignore:

  • Promotion of nepotism, corruption, and incompetent leadership
  • Lack of financial resources
  • Board of directors that lacks the knowledge to make informed decisions
  • Board controlled by one individual who frequently disregards expert advice
  • Inadequately qualified members who do not have appropriate knowledge or experience to analyze key business transactions
  • Ignorance of financial results supplied by financial analysts, auditors, and regulators

Consequences of Poor Corporate Governance

  • Poor monitoring and weak control systems can negatively impact the company’s performance and value.
  • Poor decisions can lead to failure in the evaluation of performance, and companies might face difficulties with future forecasting and cash flow planning.

Importance of Leadership

The leadership of a company decides the fate of the company. Therefore, it is crucial to look at the experience of the director, who is entrusted with the responsibility to lead management. Effective leadership sets the tone from the top by communicating the organization’s strategy, values, behaviors, and cultures.

Various examples have proven that poor corporate governance has led to the downfall of the largest companies. Have you implemented good corporate governance in your business?

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