Corporate governance is a set of rules, procedures and practices that companies use to run themselves. This governance framework provides the checks and balances to hold companies accountable to their employees, shareholders and other stakeholders.
The models of corporate governance are diverse in today’s business world, and all have a unique effect on the performance of a company. Certain governance systems focus more on the stock exchange, while others concentrate on a company’s customers or employees.
The primary responsibilities of the board include controlling the company’s strategic plan and ensuring its the compliance of ethical and legal requirements. The board must also supervise management and the CEO. This requires active participation from all directors and preparation for board meetings.
A well-functioning structure for committees allows the board to review and discuss issues in greater depth than may be possible at full-board meetings. The board should determine the duties to be assigned to each committee and decide the members of the committees.
A company’s governance data room structure should be fair to all its shareholders. This includes avoiding the use of decisions that favor one group of shareholders over another. Also, it means treating suppliers, vendors and communities fairly.
The role of the board in corporate governance is different according to industry and country. In the United States, for example the Securities and Exchange Commission (SEC) has created a set of best practices for boards in areas like ESG reporting, cybersecurity and governance structures. The SEC’s requirements are complemented by guidance for good practice from leading global university centers of excellence in leadership and business management.