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The Core Principles Of Good Corporate GovernanceWednesday, 19 Feb 2014
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The Core Principles Of Good Corporate GovernanceThe Cadbury Report which was released in the UK
in 1991 outlined that "Corporate governance is the system by which businesses are directed and
controlled." Good corporate governance is a key factor in underpinning the integrity and efficiency of
a company. Poor corporate governance can weaken a company’s potential, can lead to financial
difficulties and in some cases can cause long-term damage to a company’s reputation. A company
which applies the core principles of good corporate governance; fairness, accountability,
responsibility and transparency, will usually outperform other companies and will be able to attract
investors, whose support can help to finance further growth.This blog will briefly outline the role of
each principle.FairnessFairness refers to equal treatment, for example, all shareholders should
receive equal consideration for whatever shareholdings they hold. In the UK this is protected by the
Companies Act 2006 (CA 06). However, some companies prefer to have a shareholder agreement,
which can include more extensive and effective minority protection.In addition to shareholders,
there should also be fairness in the treatment of all stakeholders including employees, communities
and public officials. The fairer the entity appears to stakeholders, the more likely it is that it can
survive the pressure of interested parties.Related: Benefits of Effective Governance and
ComplianceAccountabilityCorporate accountability refers to the obligation and responsibility to give
an explanation or reason for the company’s actions and conduct.In brief:
The board should present a balanced and understandable assessment of the company’s position and
prospects;
The board is responsible for determining the nature and extent of the significant risks it is willing to
take;
The board should maintain sound risk management and internal control systems;
The board should establish formal and transparent arrangements for corporate reporting and risk
management and for maintaining an appropriate relationship with the company’s auditor, and
The board should communicate with stakeholders at regular intervals, a fair, balanced and
understandable assessment of how the company is achieving its business purpose.
Related: Doing Business in Ireland: Uncomplicated Corporate ComplianceResponsibilityThe Board of
Directors are given authority to act on behalf of the company. They should therefore accept full
responsibility for the powers that it is given and the authority that it exercises. The Board of Directors
are responsible for overseeing the management of the business, affairs of the company, appointing
the chief executive and monitoring the performance of the company. In doing so, it is required to act
in the best interests of the company.Accountability goes hand in hand with responsibility. The Board
of Directors should be made accountable to the shareholders for the way in which the company has
carried out its responsibilities.Related: Corporate Governance Best PracticeTransparencyA principle
of good governance is that stakeholders should be informed about the company’s activities, what it
plans to do in the future and any risks involved in its business strategies.Transparency means
openness, a willingness by the company to provide clear information to shareholders and other
stakeholders. For example, transparency refers to the openness and willingness to disclose financial
performance figures which are truthful and accurate.Disclosure of material matters concerning the
organisation’s performance and activities should be timely and accurate to ensure that all investors
have access to clear, factual information which accurately reflects the financial, social and
environmental position of the organisation. Organisations should clarify and make publicly known
the roles and responsibilities of the board and management to provide shareholders with a level of
accountability.Transparency ensures that stakeholders can have confidence in the decision-making
and management processes of a company.Related: The Company Secretary: Building Trust Through
Governance - OverviewBenefits Of Corporate GovernanceStrong corporate governance maintains
investors’ confidence, whose support can help to finance further growth. Companies who implement
the principles of good corporate governance into working environemnt life will ensure corporate
success and economic growth. They are the basis on which companies can grow. Choose Ireland For
Business - Whitepaper
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Comments
8/15/2015, 1:17:05 PM
corporate governance is an issue that is on cards recently,
Reply to michael tapiwa
3/14/2018, 5:27:30 PM
well educative study
Reply to REWARD MURIDZI
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