Best practices for corporate governance are not just for businesses that are legally structured as corporations. It’s a system that requires the leaders to do more than simply execute well-designed strategies. They must also be fair and accountable 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 concepts that you can apply to any organization of any size:
Transparency is among the most essential aspects of good corporate governance. Transparency is crucial for board members and management to be open to auditors, shareholders and the public about financial reporting, accounting, key decisions and internal practices. This means that your business should make information about its social and environmental impact easily accessible to anyone who may be interested.
Another aspect of corporate governance is the creation of clear roles and responsibility for your board. This can be done through job descriptions for your board, its chair and vice chairs, committees and their chairpersons or terms of reference (TOR) for individual directors. This will ensure a consistent list of responsibilities, as and clear boundaries for delegation and limitations on authority. It helps to create an environment of open communication and collaboration, while helping to minimize errors and ensure compliance with law. It can even lead to more opportunities for growth as your business expands and diversifies.