What Are the Types of Corporate Governance?
Corporate governance is the set of policies, structures and procedures which a company employs to manage risk and ensure accountability. Its goal is to create a plan for long-term growth while minimizing the chance of financial losses, waste, risks and corruption.
Fairness, diversity and transparence are the core principles of corporate governance. These principles are derived by the notion that management and the board must treat all stakeholders equally and fairly, including employees and shareholders. This means establishing, maintaining and implementing a formal, transparent procedure to choose and oversee critical board members and executive members’ performance. It also involves ensuring that the remuneration of the top executives and the board is aligned with the company’s long-term interests and providing the necessary supervision to avoid conflicts of interest.
Transparency means being transparent and willing to provide accurate information to all stakeholders, including shareholders. This includes the willingness of an organization to make public both good and bad news. This also means communicating this information on a regular basis and making it easily accessible.
Depending on the type of company the different committees and boards could play a role in corporate governance. It is the responsibility of the board to establish and supervise a formal governance system. This includes appointing the lead or presiding director if the board structure is one where the chair and CEO are combined. The director must be independent of the chair and be appointed for a term set by the board. The lead director is accountable for the implementation of governance policies and procedures that align with the business’s legal, regulatory and cultural environment.