Corporate governance is the process of making rules, policies and controls and resolutions to encourage positive corporate culture and behavior. It also safeguards organizations from business dangers and crises, such as cyber-security threats, corruption in leadership as well as economic downturns and political instabilities. It also includes contingency plans to assist businesses in coping with these challenges and emerge on the other side stronger and more resilient.
Corporate governance structures and practices differ according to the size of the business, industry, ownership structure, and jurisdiction. Despite their differing characteristics, these governance structures and practices should all have a common goal – constructing value over time for shareholders. They should also permit flexibility to modify and adapt their governance practices as needed to accomplish this goal.
The board of directors of a corporation is accountable for establishing objectives for strategic planning, appointing top management and monitoring them, as well as representing the shareholders’ interests. Board members must comprehend their responsibilities, and work with senior management to fulfill them in a manner that is supportive of the growth of the business and financial performance.
Stakeholders should be urged to engage in dialogue and communication with the board of directors and management. This will enable them to make their viewpoints to be heard in areas that traditionally, fall within the control of management and the board, such as strategic direction and decisionmaking. When doing this it is essential for the board and management to be transparent and honest with the stakeholders regarding their governance structures and practices as well as their reasons for using them.