Corporate governance simply put are the rules, mechanisms, and processes through which corporations set their objectives, missions, etc., to maximize value for ALL stakeholders.
Growing up, my grandmother used to refer her home to her office and her role as the caregiver as the COO of her company. They were rules and processes which everyone in her team had to adhere, to make the home functional and in line with her vision.
The corporate governance in itself is all-encompassing. It is a very broad subject, and there are still ongoing research as regards this. For the purpose of this article, we would talk on the primary aspects of Corporate Governance.
According to corporate governance experts, it has been broken down into four simple words:
Simply put, without people, then there is nothing like corporate governance, as humans are the ones to make it work.
Secondly, there has to be a purpose for why, what, and when. The following questions are very important;
- As an organization, why are we doing this?
- What do we stand to achieve by doing this?
- When or how soon can these be implemented?
Processes are not static. Processes are the means and ways by which governance is to be carried out. It can change as time goes by, thereby giving a chance for flexibility. This allows the organization to grow and to do away with policies that do not work thereby improving efficiency.
As long as the above three functions are made to work, then performance is certain. It is critical to look at the type of corporate governance your organization is adopting from time to time, to ensure that they are result-oriented, and determine whether it was successful, successful enough or not successful.
In conclusion, for corporate governance to be effective, it has to be measured with following characteristics, which are already enshrined into the four P’s. It should be noted that these characteristics are not all that there is, but for the purpose of this article, find them below;
- Corporate Governance has to have a clear organizational strategy that has to be transparent and responsive, and the management has to be disciplined enough to make it work.
- Accountability and fairness are also a must, which must also give room for consensus in the best interest of the organization.
- Risk management has to be put in place. Risks cannot be avoided therefore it will be advisable to put this in check.
- For corporate governance to be successful, the organization’s management team will need to create a code of conduct which they will take responsibility for the decisions taken and performance of the organization at large.
Always remember to ask the question, is it working