A clearly defined corporate governance structure promotes fairness and transparency, which helps your business build solid relationships with its shareholders and the local community. It helps define roles, assures accountability, and permits compliance with laws and regulation. It also supports the long-term growth of a company by ensuring that shareholders and management have the same interests.
There are many types of corporate governance, but the one that is most effective for you depends on the goals of your company and its the culture of your company. A few of the key concepts to keep in mind are:
Unitary Board Structure
In this corporate governance model the board of directors is accountable for making decisions and overseeing the company’s activities. The board is made up of executive and nonexecutive directors. This kind of structure is prevalent in mid-sized and small businesses.
Continental Model
A two-tiered model, the Continental model gives control to a management board as well as a supervisory board. The management board is comprised of insiders within the company such as executives and managers. The supervisory board is composed of outsiders, such as bankers who have stakes in the company.
Stakeholder-Oriented Governance
This type of governance structure, unlike traditional structures that focus on shareholder interests, will consider all stakeholders, including employees, vendors and customers in addition to the community. It encourages boards to design effective engagement programs and to adopt policies that reflect broader environmental and social issues. The board must be transparent and transparent about its decision-making process and communicate this information to all parties. It is also important to ensure that there are clear lines of communication between management, the board and shareholders.
