Company Governance Structure
Good company governance is an essential component of any successful business. It’s not just about developing and implementing rules and policies; it’s about ensuring that each individual’s decisions and actions support the mission, vision and values of the organization. Proper corporate governance provides a framework for creating and monitoring the strategies and processes to help a company achieve its objectives.
At its most basic, company governance refers to the structures, systems and processes that guide how a business is managed and how it interacts with stakeholders and shareholders. These structures and processes provide the framework within which decisions are made, the way that shareholders can impact those decisions and the shareholder voting process. Company governance framework typically involves the following components:
Board of Directors: The board of directors is elected to serve as the governing body for the company and to protect the interests of shareholders. The board is responsible for setting objectives, overseeing strategic initiatives and defining policies. This includes policy on corporate culture, stakeholder management, risk management, financial reporting and legal liabilities. A board of directors typically meets quarterly or semi-annually to review the company’s performance and to establish or revise policies and objectives.
Shareholder Representation & voting rights: Shareholders are the owners of the company and have the right to vote on corporate matters. Shareholders elect the board of directors and approve resolutions and management decisions. There is typically a shareholder vote required to approve executive compensation, company mergers and acquisitions, and other major corporate actions.
Corporate Governance Policies & Procedures: Establishing and adhering to corporate governance policies and procedures is crucial to the success of a corporate enterprise. Such policies and procedures address the roles and responsibilities of directors, the oversight of management, oversight of business operations and the disclosure of corporate information. The strategies, procedures and documents used to guide corporate governance are called corporate governance documents.
Compliance & Ethics Policies & Procedures: Compliance and ethics policies and procedures are designed to ensure that the company is adhering to legal and regulatory requirements and has internal measures in place to manage corporate conduct and business practices. Many companies adopt a formal Code of Conduct which outlines standards for ethical behavior, defines acceptable standards of business practice and outlines any disciplinary procedures for malfeasance or misconduct.
Internal Control & Risk Management Policies & Procedures: Internal controls are put in place to help a company identify, measure, manage and monitor risks related to financial, operational and legal activities. Companies typically develop policies and procedures to ensure these internal controls are functioning properly.
Investor Relations: Investor relations is a function that assists the board of directors in communicating with shareholders and other stakeholders. Investor relations managers work as liaisons between the board and shareholders to ensure that shareholders are aware of relevant issues and events and to ensure that any investor communications provide accurate and timely information.
Audit: An independent audit of the company’s financial and operational performance is typically required to verify the accuracy of the financial statements and accounts submitted to the board of directors. The board has the responsibility to assess the credibility of the audit report and to consider any findings or recommendations that may apply.
These components of company governance provide the framework in which to ensure that an organization is run ethically and transparently in order to maximize shareholder value. Each of these components must be effectively managed to ensure the long-term growth and success of the company. When establishing a company board of directors, shareholders should consider the level of corporate governance needed to optimize their potential success.
