Whether you have a small or large company, it is critical to have good corporate governance to establish a positive culture for your organization. Good corporate governance involves transparency, fairness, consistency, accountability and responsibility. It can also be financially beneficial to an organization, which can lead to larger stock repurchases, greater dividend yields and higher profit margins. When corporate governance procedures are instituted it also enhances the reputation of the organization and builds integrity, to make the entity more attractive to investors and customers.
The following are some useful tips to help you develop good corporate governance for your organization:
Document governance principles. Whenever corporate governance principles are been documented, it is important to establish the functions and roles of the Board and committees.
Document committee charters. A committee’s authority for decision making as well as their responsibilities and roles should be outlined by all committee charters. It creates accountability for the organization.
Within a charter, there should be a well defined plan communicated to deal with governance and resolution of various issues.
The work of the public accounting firm should be monitored by the audit committee. This should include the scope of both non audit and audit services, level of services and fees as well as their independence. There are going to be big changes with the government’s reforms according to Barclay Simpson
Incentive plans, fringe benefits and remuneration for executive officers should be addressed by the compensation committee.
Recommendations for new members should be made by the corporate governance committee and it should monitor board performance.
Executive management and committee performance should be monitored by the corporate governance committee.
Independent members, including a financial expert, should be part of the audit committee. Take minutes at all meetings and formal reports should be made by committees on a regular basis to the board.
Employee code of conduct policies should be documented and given to all employees. There should also be board code of conduct policy documented for non-employee directors and provided to all board members.
Employee performance evaluations should be formalized.
All employees should be provided with employee complaint procedures.
All employees should be informed of what the organization’s non-retaliation policy is and that they may be made anonymously.
When some of basics principles of corporate governance are followed, it sets a positive tone from the very top of the organization, and creates transparency at every level of a firm’s operations. Given the recent financial meltdown and challenging economic times, it is more critical than it has ever been to expose fraudulent activity. Good corporate governance can help to expose and address any issues before they turn into major problems.