Best practices in corporate governance are not just for businesses that are legally incorporated as corporations. It’s a system that requires leaders to go beyond just implement well-thought-out strategies. They must also be accountable and fair to all stakeholders. Regardless of whether your business has one or many stakeholders–shareholders, employees, clients, students or the community–your company’s approach to governance will change over time and depend on your unique needs and context. There are some general rules that you can apply to any size company:
One of the most important aspects of a good corporate governance system is transparency. Transparency is important for management and board members to be transparent with auditors, shareholders, and the public about financial reporting, accounting, major decisions and internal procedures. This means that your company should provide information on its environmental and social impacts easily accessible to anyone who may be interested.
The definition of clear roles and responsibilities is a further aspect of corporate governance. This can be accomplished by job descriptions for your board, its vice chair and chair as well as committees and their chairpersons, or terms of reference (TOR) for directors individually. This will ensure that there are clear boundaries and limitations to authority, as well an established set of responsibilities. It can help to foster a culture of open communication and collaboration while helping to reduce mistakes and ensure compliance with laws. It could result in better growth opportunities as your business expands.