The concept of corporate governance refers to a set of principles and standards that determine, on one hand, the design, integration, financial planning and operation of the governing bodies of companies.

1. B Y A D A M G R E E N E C PA
HOW TO IMPLEMENT A GOOD
CORPORATE GOVERNANCE?

2. HOW TO IMPLEMENT A GOOD CORPORATE
GOVERNANCE?
The corporate businesses play a central
role in our economies. It is not a secret
to no one to affirm that global economy
is mainly driven by corporations,
financial blocks and private
conglomerates. Thus, a good corporate
governance is an increasingly important
factor in broader population sectors.
That is the reason why to evaluate and
improve the legal, institutional and
regulatory frameworks for corporate
governance in enterprises is a task of
high priority nowadays.
Image courtesy of Olga Berrios at Flickr.com

3. HOW TO IMPLEMENT A GOOD CORPORATE
GOVERNANCE?
However, what is corporate governance, and why is it so important? The
concept of corporate governance refers to a set of principles and standards
that determine, on one hand, the design, integration, financial planning and
operation of the governing bodies of companies, and, in second hand, the
three powers that direct the way of any company: Shareholders, Directors
and Senior Management. Good Corporate Governance provides incentives to
protect the interests of companies and their shareholders; it helps to monitor
the creation of the valuable and efficient use of resources by providing
transparency of information. The important aspect to remember about
corporate governance is that it is not an individual instrument. Corporate
governance is, above all, a concept that includes discussion on appropriate
management and corporate control structures. It also includes the rules for
governing the power relationships between owners, the board of directors,
management and, not least important, stakeholders such as employees,
suppliers and customers.

4. HOW TO IMPLEMENT A GOOD CORPORATE
GOVERNANCE?
The concept appeared some decades ago in the most developed countries of
Western Europe, Canada, the United States and Australia, as a result of the
need of the minority shareholders of a company to monitor the investment
plans of States. In other words, they wanted to know what was being done
with their money and which were the future expectations, derived from those
plans. Thanks to this, the majority of shareholders of any business and its
management, may initiate an open information process for avoiding
companies to deviate their ways from their initial basis, and, in consequence,
setting limits to corporate corruption. Of course it is not restricted to
companies. Corporate governance is a vital matter in international
organizations, the stock market, pension funds, mutual societies, insurance
companies, because need for information on their investment is absolutely
definitive for the growth of each one of them.
The business administration advisor Adam Greene considers that a good
example of corporate governance are the six principles of the OECD (read
the full document here).

5. HOW TO IMPLEMENT A GOOD CORPORATE
GOVERNANCE?
OECD efforts has made incredible contributions to the development of a
culture of values in the field of professional and ethical behavior, which
depend on properly functioning markets. Although there is clearly not a single
model of corporate governance, the work that has been performed by the
OECD has served to identify some common elements that underlie good
corporate governance. Without a doubt, those principles will help you to
implement the best corporate governance. Let’s explore them better.
I. To ensure the basis for an effective Corporate Governance framework: The
corporate governance framework should promote transparent and efficient
markets. It should be consistent with the rule of law and clearly articulate the
division of responsibilities between the supervisory, regulatory and executive
authorities.
II. The Rights of Shareholders and Key Functions in the field of property: The
corporate governance framework should protect and facilitate the exercise of
shareholder rights.

6. HOW TO IMPLEMENT A GOOD CORPORATE
GOVERNANCE?
III. Equitable Treatment of Shareholders: The corporate governance
framework should ensure equal treatment to all shareholders, including
minority and foreign shareholders. All shareholders should have the
opportunity of effective remedy in case of violation of their rights.
IV. The Role of Stakeholders in the Field of Corporate Governance: The
framework for corporate governance should recognize the rights of
stakeholders established by law or through mutual agreements, and
encourage active cooperation between companies and stakeholders in order
to produce higher rates of wealth and employment, and to facilitate the
healthy sustainability of companies from a financial standpoint.
V. Disclosure and Transparency: The corporate governance framework
should ensure a timely and accurate disclosure of all material matters
regarding the corporation, including the financial situation, performance,
ownership and governance of the company.

7. HOW TO IMPLEMENT A GOOD CORPORATE
GOVERNANCE?
VI. Responsibilities of the Board: The corporate governance framework
should ensure, in first place, the strategic direction of the company, in
second place, the effective control of the executive management of the
Council, and, in third place, the responsibility of that State against the
company and shareholders.
Today, corporate governance is as important as any other efficient
financial performance. About an eighty percent of investors would pay
more for a company with a good corporate governance; since this
element provides greater security for your investment, ensuring healthy
corporate practices. The greater transparency and more information there
is, the greater the confidence of investors in the market.