The process of establishing effective corporate governance requires the establishment of rules, controls, policies and resolutions that promote positive corporate behaviour and work culture. It also protects organizations against business risks and crisis such as corruption in leadership and cybersecurity threats. It also includes contingency plans that aids companies in coping with the forces of business and become stronger and more resilient.
Corporate governance structures and practices vary depending on the size of the company and industry, its ownership structure, and jurisdiction. These governance structures and practices, despite their differing, should all have the same objective: to create long-term value for shareholders. They should also be flexible enough to adapt their governance practices to achieve this goal.
The board of directors of a company is responsible for setting goals for the company’s strategic direction, appointing senior management and monitoring them, and representing shareholders’ interests. The board members must understand their responsibilities, and work with the company’s management team to ensure that their duties are fulfilled in a manner that encourages growth of the business and financial performance.
Stakeholders should be encouraged take part in shareholder outreach and dialogue with the board and management of a company. This will allow them to make their views to be heard in areas that historically, were within the authority of management and the board–such as strategic direction and decisions. When doing this, it is important for the board and management to be honest and transparent with their stakeholders about their governance structures and practices as well as their motivations for using them.