Governance requires time, dedication and commitment from leaders to understand the benefits of aligning all levels of an organization. Good corporate governance ensures a fair and transparent business environment, where everyone can be held accountable for their actions. On the other hand, poor corporate governance leads to waste, poor administration and corruption. Only good governance provides sustainable and solid business performance. But what, exactly, is good corporate governance?

Corporate governance refers to any of the policies and processes that control a company. But, it is more exact to say that governance refers to the policies and processes that help the corporation move toward its goals, avoiding unwanted conflicts.

Governance must balance the needs of different groups. This includes shareholders, board members, customers and stakeholders within a company, such as: Executive Management, Operations, Project Management, Process Improvement and Information Technology.

Good governance must be incorporated in the good behavior and good judgment of those who are in charge of running an organization. When done properly, governance creates an honest and transparent environment that promotes structured planning and agility in execution. In addition, it encourages board members and executive committees to dedicate money to the corporation for innovation and growth.

Organizations striving to improve governance need to closely examine their internal business structures, processes, and projects.

Ten principles for good governance:

Roles and Responsibilities – There should be clarity with respect to individual responsibilities, the organizational expectations of executives and the role of executive and governing committees.

Structure and Composition – An executive committee must have the right group of people, taking into account the background, skills and experience of each individual. Also, it must be aware of how the inclusion of an individual contributes to the collective capacity and effective functioning of the committee.

Objective and Strategy – The executive committee plays an important role in defining the organization’s vision, purpose and strategies, helping the organization to understand them and adapting the plans to implement them.

Risk Management – By implementing an appropriate risk and internal control supervision system, executive committees can help increase the likelihood that the organization meets its goals.

Organizational Performance – The executive committee determines and evaluates appropriate performance categories and indicators for the organization.

Committee Effectiveness – The effectiveness of an executive committee can be greatly improved by: carefully planning its activities; efficiently conducting committee meetings; periodic evaluations of organizational performance; having an executive succession plan; and the effective use of subcommittees, when appropriate.

Information Flow – It is important that the executive committee ensures the flow of information to the board that assists in making decisions; that there is an environment of transparency and accountability for external stakeholders and for employees throughout the company; and that the integrity of the financial statements and other material information is safeguarded.

Organizational Maturity – The executive committee has a role to play in improving the capabilities of the organization they serve.

Culture and Ethics – The executive committee sets the tone for ethical and responsible decision making throughout the organization.

Engagement – The executive committee helps an organization to effectively engage with stakeholders and employees.

Tobias Schroeder

Author

Tobias Schroeder

MBA in Strategic Management from UFPR. Business and market analyst at SoftExpert, a software provider for enterprise-wide business processes automation, improvement, compliance management and corporate governance.

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