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Corporate governance is a set of rules, procedures, and practices that businesses use to manage themselves. This governance framework provides the checks and balances that hold companies accountable to their shareholders, employees and other stakeholders.
There are various models of corporate governance in modern business and each one has a distinct impact on the overall efficiency of a company. Some governance systems are more focused on the stock market, while others are more focused on the company’s customers, or its employees.
The board’s primary duties include controlling the company’s strategy and ensuring the compliance of ethical and legal requirements. The board must also provide oversight of management including the CEO. This requires active participation of all directors and preparation for board meetings.
A structure for committees that is effective allows the board to examine and discuss topics more in depth than could be during full-board meetings. The board should establish the roles to be assigned to each committee and choose the committee members. those committees.
A company’s governance structure should be fair to all of its shareholders. This means avoiding decisions that favor one group of shareholders over another. Also, it means treating vendors, suppliers and communities fairly.
The role of the board differs according to the industry and the country. In the United States, for example, the Securities and Exchange Commission (SEC) has created a set of best practices for boards in areas like ESG reporting and cybersecurity, as well as governance structures. The SEC’s requirements are supplemented by guidance on good practice from the world’s top university centers of excellence in leadership and business management.
