Corporate governance, as the term denotes, refers to the way in which a company chooses to govern itself, and is accompanied by a firm set of rules that provide direction and control toward achieving its objectives. Good governance means that your business’s processes are aimed at producing results which meet the needs of society and organisational prosperity while making strategic use of its available resources. Being first practiced and influenced by leadership, – because strong leadership is needed to drive inspiration within an organisation – the steady application of these policies and principles, among other things, intends to create a healthy, compliant, transparent, and accountable corporate culture that is continuously reviewed and improved in order to ensure that your behaviour aligns with the values your organisation seeks to embody. This is a cornerstone for success, that enables the creation of opportunities for growth and a competitive advantage.
Good corporate governance has become a key focus area for businesses to position themselves favourably in order to withstand a difficult economic climate.
Some of the benefits of good corporate governance include:
- Builds morale, reputation, and a legacy: Implementing procedures that support good governance enhances a company’s identity where stakeholders and potential investors are confident to place increased levels of trust in you, which in turn allows you to develop stronger, longstanding relationships.
- Increases success rate for financial performance and enhances sustainability: Implementing protocol for good governance is intended to assist with being able to quickly identify issues as well as to quickly make decisions to resolve these potential issues thus reducing the eventuality of a crisis and the cost it bears.
- Creates a greater ability to attract and retain talent: A significant focus has been placed on culture being a key contributing factor to the success of a company. Maintaining transparency surrounding fairness, accountability and operations, gives your employees a greater sense of responsibility and awareness as to where they are positioned to create value within an organisation.
- Creates an effective framework aimed at meeting business objectives: Decision-making that takes into consideration major stakeholders such as employees, suppliers and the community alike, has created a wider vision for successful results. Providing each stakeholder with a percentage of valuable involvement creates a more accountable culture, generating a higher potential to reach objectives within an organisation.
- Creates more opportunities to gain a competitive advantage: Every industry is either constantly evolving or has the potential to evolve at a certain point; adopting good governance and creating an environment where its practices can be sustained is vital to ensuring that your organisation is adaptable to change, thus providing a greater competitive advantage and chance at survival.
- Creates opportunities for investment: An organisation that represents stability and reliability increases its chances of attracting premium investors, as well as increasing their opportunity to borrow funds at a better rate.
- Provides a practical way to guide decision-making at all levels: The ability to make informed decisions can quickly improve performance and reduce the effects of potential failures. One way to promote this kind of decision-making ability is to ensure that information is readily available to key stakeholders, i.e. a culture of transparency.
Strong corporate governance practices can increase the effectiveness and efficiency of business operations through instilled values that emanate from leadership throughout and has the potential to yield major benefits for an organisation.