Corporate governance isn’t only for legally constituted corporations. It’s a framework that requires leaders to go beyond simply execute well-designed strategies. They must also be fair and accountable to all stakeholders. Regardless of whether your business has one or many stakeholders–shareholders, employees, clients, students or the community–your company’s approach to governance will change over time and depend on your unique needs and context. But there are some general principles that you can apply to any business, large or small:
One of the most crucial aspects of a good corporate governance system is transparency. This means that you must ensure that your management and board members are open with shareholders, auditors, and the public regarding financial reporting accounting standards, major decisions, and internal practices. It also means that your organization provides information on its social and environmental impact in ways that can be easily accessible to those who might be interested.
Setting clear the roles and responsibilities of each is another aspect of corporate governance. This can be done by drafting job descriptions for your board including its chair and vice chairs committees and chairpersons, or terms of reference (TOR) for individual directors. This will provide a common set of responsibilities, and clear boundaries for delegation and limitations on the authority. It will help create a culture of open communication and collaboration, and help to reduce errors and ensure compliance. It could also lead to better opportunities for growth when your business expands and diversifies.