The easiest way to remember the basis of a corporate governance framework is the three P’s:
It encourages robust decision making through these three P’s and can include many tasks.
Different companies will have different systems of governance in place, but they are all based on the same structure. It is also worth noting that corporate governance is the first line of defence when it comes to things like malpractice claims. Holding everyone within your organisation accountable and working to head off mistakes before they happen.
Speaking broadly, the aims of a corporate governance framework are:
There are four areas of importance in corporate governance: People, Purpose, Process and Performance. These are the cornerstones for a successful business.
People are important because they are involved in every aspect of business. People who make up the board include the founders, stakeholders and consumers. It is the people who set a purpose to work toward, create a process to achieve it and then evaluate their performance.
All governance exists for a purpose and to achieve this purpose. The purpose should be embedded in everything from mission statements to policies. And every project, meeting, networking event, and risk assessment should be contributing to achieving that purpose.
To achieve the purpose, you need a process. This links in nicely with the final ‘P’, performance, as we use performance analysis to better streamline processes. This can take some time to set up, but it is worth the effort as a fully functioning process can really help your organisation grow.
Finally, we have performance. Analysing performance is key in any industry, and it serves as one of the primary roles of corporate governance. From analysis to application, the cycle then starts again.
By showing the world that you’re operating within a system of rules that align with all stakeholders’ interests, you’re waving a big green flag. When people (and investors) can see that you have considered accountability, transparency, fairness, responsibility, and risk management it automatically raises you above other businesses.
Solid corporate governance = a well-managed ethical business. A well-managed ethical business is attractive to investors. So, you can see the importance right there, financial viability is the result of good corporate governance.
When the interests of all stakeholders are aligned, great things can happen. When risks are controlled, processes streamlined, and consistency is the industry standard, the positive impacts are endless.
And it’s not just investors who stand to benefit from strong corporate governance. A great company culture that’s built on integrity and transparency fosters positive performance and a more sustainable business.
The benefits of corporate governance include:
Here at Arbor Law, our corporate governance lawyers have both practical expertise and extensive experience. We offer a full suite of services to support private and public companies and provide advice and services in areas not covered by in-house legal teams, in particularly complex areas, or where internal resources may be stretched.
Some of the areas we advise and support businesses and legal teams on include:
Risk Management and Governance