5 Principles for Effective Corporate Governance.

An Overview of Principles for Effective Corporate Governance.

It is said for any organisationt the buck stops at the top. The success of any organization squarely depends on the executives who are the policymakers in charge of the direction and day-to-day operations. This underscores the importance of corporate governance for any organization.  Corporate governance substantially impacts how organizational objectives are set and executed, how risks are monitored and assessed, and how internal performance is progressed.

Corporate governance entails systems by which organizations are managed and directed. It is an internal discipline essential in maintaining healthy and productive relations among the organization participants that is; the owners and investors, the board, the managers, shareholders, and all other stakeholders affected by the organization’s activities. Corporate governance has evolved mainly in connection to listed public companies, it is also relevant to all other organizations including private companies, family businesses, and public corporations.

Principles of good corporate governance

Allow me to discuss the key aspects which constitute proper corporate governance;

An effective management board:

Establishment of a well­balanced team of board members that includes executive and non­executive members. Choosing the right board members with industry­relevant broad experience and exposure may just be the silver bullet that makes the difference between an organization and its strategic positioning. The board should have clear governing responsibilities from the organization managers.

Transparency and disclosure in running an organization:

Proper corporate governance entails the willingness of organizations to timely, consistently and accurately, inform stakeholders of activities, future plans, and any risks involved in the business strategies. This will provide a basis for making informed decisions in relation to the risks and rewards of any investments.

 Greater transparency and disclosure boosts the confidence in the operation of the organization leading to better access to capital financing..

Fairness:

There should be equal treatment of all organizational stakeholders. The fairer the organization appears to stakeholders, the more likely it is to survive the pressure of interested parties.

Responsibility and Accountability:

Corporate accountability obligates the governance players to offer fair and understandable explanations for the organization’s actions and conduct.

The board exercises authority on behalf of the organization. Corporate responsibility on the other hand requires the board to accept full responsibility for the authority that they exercise.

Corporate accountability goes hand in hand with accountability as the board should be made accountable to the stakeholders for the manner in which the organization carried out its responsibilities.

Checks and balances in governance structures:

Consolidating unfettered power and authority into fewer hands leaves no room for effective oversight which is ripe for misconduct. Boards should implement and actively participate in checks and balances policies.

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