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Corporate Governance Tips
Corporate governance is the set of rules, practices and relationships that a company follows in order to run its business. Its objective is to ensure that the organization is managed in a responsible manner that is accountable to stakeholders and shareholders, while also maintaining an eye on long-term growth.
A healthy corporate governance framework plays a crucial role in the success of any organization. Its components include transparency accountability and fairness. By keeping these principles in mind, you can help companies avoid embarrassing scandals, encourage economic growth, and cultivate confidence with lenders, investors employees, as well as the public at large.
It’s normal for concerns over corporate governance to wax and wanes, however, highly reported scandals of misdeeds could rekindle interest in the issue. The scandal at Enron and other misdeeds at the turn of the century were a major factor in the Sarbanes-Oxley Act, which increased the oversight requirements for public-traded companies.
The best method to avoid corporate governance issues is to ensure that there is a formal, transparent process for the appointment and nomination of board members. It is also crucial that a board adopts an policy that allows the resignation of any directors who do not get a majority vote. The board should also establish an official position for the lead director, which is known as a presiding director who is an independent leader of the board.
A board should also make sure that it is diverse enough in terms of gender, age and ethnicity. This is crucial to ensure that the board can effectively represent the needs of all stakeholders and protect against biases that are unconscious.
