Best practices for corporate governance aren’t just for companies that are legally incorporated as corporations. They’re a system that leaders must do more than execute effectively on well-planned strategic plans. They must also be fair and accountable to all stakeholders. Regardless of whether your business has one or many stakeholders—shareholders, employees, clients, students or the community—your company’s approach to governance will change over time and depend on your unique needs and context. But there are some general principles that can be applied to any company, big or small:
Transparency is one of the most crucial aspects of good corporate governance. This means that your board members and management are open with shareholders, auditors and the general public regarding financial reporting, accounting standards, major decisions, and internal procedures. It also means that your company is open about its environmental and social impacts in ways that are easily accessible to those who might be interested.
Another aspect of corporate governance is establishing clear roles and the responsibilities of your board. This can be done by drafting job descriptions for your board itself as well as its vice chairs and chair as well as committees and their chairpersons, or terms of reference (TOR) for directors individually. This will ensure that there are clear boundaries and limits to authority, as well the same set of duties. It will help create a culture of open communication and collaboration, and also reduce the risk of errors and ensure compliance. It could also lead to better growth opportunities when your business expands and diversifies.
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