Tangible benefits of a corporate governance framework January 23, 2019

Tangible benefits of a corporate governance framework

What is corporate governance?

Corporate governance is a system in which a company’s system of rules, practices and processes are directed and controlled. Corporate governance involves balancing all the different interests of the companies’ stakeholders, management, customers, government and community.

Corporate governance provides the framework for a company’s objective; it looks at the management’s action plan and internal control to performance measure.

The directors are usually responsible for the board which include looking at the company’s strategic aims and having the leadership to put them into effect. They will also supervise the management of the business and reporting back to the shareholders on their stewardship. Corporate governance is what the board of a company does and how it sets the value of the company. This is different from the day to day operational management of the company by full time executives.

Good governance can have wider impact on non-listed sector because it is mostly about improving transparency and accountability within existing systems. There have been interesting developments in the last few years there has been a shift in which the elements of corporate governance label has been used to describe accountability issues beyond the corporate sector. This can be misleading as the UK corporate governance is built and developed to deal with listed company entities and not designed to cover all organisational types that may have a different accountability.

There are many tangible benefits of a corporate governance framework such as:

The corporate government frame work will help assist the board to prioritise different components that require immediate attention and help to make an appropriate decision in this regard. Good corporate governance practices will produce better operational results which will reflect how profitable the company has been.

The governing body must ensure that assurance results in an adequate and effective control environment. This assurance approach to management of the effectiveness and integrity of internal controls the information used for reporting and decision making. This will be seen as the fifth line of defence to ensure that the stakeholders, clients and customers are happy with their investment.

When the company is transparent in hand with good corporate governance this will stimulate perceived investor confidence. To get operational results and the ability to make decisions transforms into increased access to capital and a better look on debt.

The government governance framework will allow the power of diversity and create value for the organisation and perspective. This will help when you are trying to attract talented and experienced directors.

Corporate governance framework helps the stakeholders to feel included. They will see different opportunities and risks within the organisation. Board members are required to evaluate and look at legitimate and reasonable needs for all the stakeholders.

Not sure how to implement best practices for corporate governance? Read more about the benefits of the corporate governance course and browse through the courses at London TFE.