Corporate Governance System To Promote Good Business Practices
In order to survive in the business world, business leaders have found that they must maintain a corporate governance system. Without the systematic working of policies, rules and guidelines it leaves the door open to corruption, criminal and unethical behavior. Many business owners have discovered that though implementing a governance system is costly, it can be detrimental to not have one in place. Avoiding corrupt actions and dealings of managers as well as employees can assist the business with maintaining integrity in the public eyes.
Another important issue when considering the corporate governance system involves the relationship between managers, owners and investors. Without investors the corporation would not be where it is and could fail if enough shareholders were to become discouraged with actions, plans or bad decisions. These individuals have a directed and vested interest in the accountability of the business. Just as the business managers cringe at the loss of a big contract or money, the shareholders depend on the financial status of the business as well. It is important that the dealings, decision making and accountability of the business leaders be clearly directed. If there is not a set of rules or guidelines the relationship between investors and business leaders could become volatile. This not only causes poor morale, but can also be financially detrimental. In order to establish a “big brother” or “go between” the board of directors is born.
There are many corporate governance systems in play today. One of the largest and most common is the Anglo American Model. In this system there is a definite emphasis on the role and opinions of the shareholders. Most are at some level involved and choose a group of individuals to oversee the overall workings of the business, which is known as the board of directors. This group generally has set guidelines with regards to decision making, meeting and the handling of problems or short comings in the line of business. The board of directors typically is headed by the CFO or CEO, who is immersed in the daily workings and running of the business. Most corporations are set and run by the decision making of the CEO (CFO), but are still reported to the board. Generally for large purchases, decisions or the likes the board meets to grant permission to proceed. The board of directors is governed by the by-laws and also answering for the financial workings of the business directly to the shareholders.
Corporations that take their governance seriously are looked at in a more positive light from the general public. Consumers want to ensure that they are supporting and buying from corporations that uphold integrity and play by the rules. Corporate governance systems at play in the business world is not only important to the business itself, but also the good of the financial market worldwide.