Governance is all of the practices, procedures and policies that ensure that your company is moving in the right direction. It includes everything from preparing your risk management, to reviewing your finances and staying abreast with industry trends. Governance is crucial for all businesses regardless of whether they have shareholders or not. But it becomes more important when a company expands.
Good governance is an essential part of any business that strives to be accountable to all stakeholders, which includes employees, shareholders and customers. It encourages trust and ethical business practices that result in higher productivity and more profit. Good governance will help your company adhere with accepted regulations while limiting legal issues and reputational damage.
Shareholders depend on good governance to safeguard their investments, to ensure that the interests of all shareholders are taken into consideration in business operations and to ensure the long-term success of the company. Employees want a safe and secure workplace and fair wages, and customers want products and services that are built on integrity.
The board is responsible for making sure that the CEO and the management team take responsibility for their performance, and that risks are managed properly. To ensure this they must exercise a thorough and constant oversight over the activities of the company. They should not micromanage the daily business operations of the firm.
Directors should have a variety of experience and skills for effective supervision. Diversity, particularly in terms of race and gender, can increase board effectiveness. In addition, directors who have a variety of tenures have fresh perspectives, while directors who have been serving for a longer period of time provide continuity in their institutional knowledge and perspectives.