Corporate governance must take care of business ethics.
Corporate governance is the framework of structures, standards, procedures and practices that allow the management of a company to be carried out . The concept covers the links established between the board of directors , management, shareholders and other parties who have interests in the management of the company.
Before moving forward, it is important to indicate that the idea of government can refer to administration, command or the exercise of authority. Corporate , meanwhile, refers to what is typical of a corporation: a large company or an organization governed by its members.
What corporate governance does is balance the responsibilities and power of all interested parties , promoting the design and application of strategies based on consensus. In this context, ethics and transparency are called upon to prevent possible conflicts.
Origin of the concept
The concept of corporate governance began to be used decades ago in several of the most economically developed nations, such as the United States , Australia and Germany . The idea was forged from the desire of the minority shareholders of the companies to access information about the status of their investments.
Faced with this reality, the majority shareholders and managers began to carry out an opening process to provide management transparency and share information with all investors.
Thus the notion of corporate governance emerged as a scheme that contemplates the intervention of interested parties in a company and that contributes to the application of more efficient corporate practices .
Regulatory compliance must govern the functioning of corporate governance.
Principles of corporate governance
Corporate governance must provide stability and credibility to the firm. Its purpose is to promote the development of the entity, generating wealth but always acting responsibly.
In this way, corporate governance is responsible for protecting the rights of shareholders , guaranteeing equitable treatment for all of them. It also recognizes the rights held by other interested parties, encouraging cooperation between them.
Faithfully communicating the company's operations is another of the missions of corporate governance. Information on management and financial statements must be clear and must be transmitted in a timely manner.
The balance of powers is one of the keys to corporate governance. The board of directors must monitor the management team (composed of the CEO, COO, CFO, etc.), while shareholders have to monitor the performance of the board of directors.
The governance of the company, in short, is oriented towards the protection of corporate assets , carrying out the corresponding accountability and ensuring the payment of share dividends to investors. It must be emphasized that corporate governance must function in accordance with what is established in the company's statutes.
Regulatory governance is responsible for maintaining sustainable finances.
The structure
The corporate governance structure can have different actors. The composition varies depending on the sector, size and other characteristics of the company.
The board of directors , for example, is made up of the owners, investors and external advisors. Generally defines strategies and assumes supervision .
The shareholders' meeting , on the other hand, has investors as members. Their role is based on the study and management of risks and the analysis of investment performance.
The general direction or senior management , for its part, assumes the execution of administrative tasks and leads internal control actions. Finally, we must mention other parties, such as creditors and clients, who give rise to what are known as interest groups .
Corporate governance and growth strategy
Corporate governance often underpins a growth strategy . Within this framework, you can work to attract new investments, make acquisitions or carry out mergers. These operations are especially important in the case of multinational companies.
This growth strategy, of course, cannot ignore compliance with regulations . Corporate law must be considered, respecting antitrust laws and the rest of the rules that govern activities. It is also important to adapt to international financial reporting standards and respond to both an external audit and the requirements of external auditors.
Good governance
Good corporate governance generates numerous benefits. According to specialists, when corporate governance is effective and efficient, the quality of internal processes improves and market expansion is favored.
Likewise, it contributes to adding value to the company's image and attracts new investors. These issues are directly linked to transparency and the dissemination of truthful and reliable information.
Corporate governance must also consider those practices that are part of corporate social responsibility , which takes into account the impact of the organization on the environment and society in general. This influence is increasingly relevant in the consideration of interest groups.