Corporate governance refers to a set of internal policies, rules, and procedures that a company follows on a regular basis. These rules ensure that it operates in a fair and appropriate manner for the benefit of the company, its management and its stakeholders. Those stakeholders include your staff, customers, investors, suppliers and the wider community. Good governance is a must for SME’s as well as large listed companies.
With recent, very public governance failures at businesses such as BHS, Carillion and other well known brands, it is clear that business leaders need to do more in terms of living up to their responsibilities, following best practice, etc.
Most business owners and managers are familiar with the regulatory and compliance requirements of being in business. However, that is just the beginning of good corporate governance. The next step is to make sure that your business creates and delivers its strategy. The strategy should be designed to maximise the opportunities and minimise risk for the benefit of the firm and its stakeholders. You then need to build that into your company and its culture.
Good governance is not about making the “right” decisions.
Good governance is about ensuring that there is a good decision-making process in place and making sure that the process is followed. Having a strong decision making system in your firm can help you to change direction quickly and efficiently as needed.
In large businesses, the management board will probably have a team to monitor the principles of good governance. Smaller business can put a simple governance structure in place including a trusted advisor (such as your accountant) or a non-executive director (NED).
Good governance helps you and your business to manage risk.
It’s easy to get distracted by growth opportunities, business development and so forth. Good practices ensure the business stays on top of statutory reporting, annual returns, renewing insurance policies and licenses, etc. Your trusted advisor should hold you accountable for meeting your legal and statutory requirements. This in turn will help you see the bigger picture.
Finally, implementing good practices encourages the management team to review and update the firm’s strategy on a regular basis. This will consequently help maintain and/or improve the performance of the company. From time to time, this may include bringing in external experts to assist with strategic decision-making.
Does your business have good governance? If you have questions or would just like a coffee and chat about business, give us a call on 01332 292020 or e-mail us at firstname.lastname@example.org.