Effective corporate governance is the basis of a flourishing business. It consists of procedures and rules that bring shareholder interests into the eyes of other stakeholders like employees customers, company executives and employees. It also lays out frameworks for internal control to ensure the accuracy of financial statements, protect assets, and abide by laws.
It is the duty of the board to approve corporate strategies that are intended to generate sustainable long-term value; select a CEO and oversee management’s activities in operating the business, including the allocation of capital for growth, assessing and managing risks and setting the standard for ethical conduct; and review key performance indicators to spot gaps, weaknesses and opportunities. The board must provide adequate disclosure and accountability, as well as engagement to demonstrate that it is acting in the best interests of shareholders as a whole.
A strong board requires the support of a solid executive team. Boards should be willing to collaborate with independent directors as well as consultants and experts in governance to gain the knowledge and expertise they require to be efficient. This could include attending governance conferences, networking, and working with industry leaders and peers to learn from their experiences and share best practices.
As the world around us changes and our environment changes, so should our organizational frameworks to respond to emerging trends and problems. A climate change-related crisis, for example will force companies to adopt sustainability-related frameworks, practices and policies and establish emission reduction targets and monitor the progress. This includes communicating with stakeholders and shareholders about the changes in a timely manner, as well as making reports available and providing sufficient information to explain and clarify any issues that might arise.