Best practices for corporate governance are not only for businesses which are legally formed as corporations. They’re a set of guidelines that the leaders have to go beyond follow through on well-planned strategic plans, they must also be fair and accountable to all stakeholders. Regardless of whether your business has one or many stakeholders–shareholders, employees, clients, students or the community–your company’s approach to governance will change over time and depend on your unique needs and context. There are some general rules that can be applied to any size business:
One of the most crucial aspects of good corporate governance is transparency. This means that your board members and management are transparent with auditors, shareholders as well as the public with regard to financial reporting accounting standards, major decisions, and internal procedures. This means that your business should make information about its environmental and social impact easily accessible to anyone who may be interested.
Another aspect of corporate governance is setting clear roles and duties for your board. This can be done by drafting job descriptions for your board itself as well as its vice chairs and chair committees, chairpersons of the committees, or terms of reference (TOR) for directors individually. This will provide a common set of responsibilities, and clear boundaries for delegation and limitations on the authority. It can create a culture of open communication and collaboration, and help to reduce errors and ensure compliance. It could lead to greater growth opportunities as your business grows.