Best practices in corporate governance are more than just ticking boxes to satisfy the requirements. They are an established set of guidelines that help companies perform better and establish trust with stakeholders, shareholders and other stakeholders. They are a guide to the future of a company and can be applied to large or small businesses either private or public and also to businesses of all types.
Good governance begins with people. Boards must choose the best candidates, establish an elucidation of the process of hiring and ensure that their members are committed to the task. They should also ensure that they have the capabilities to effectively examine management practices.
The next step is to develop an arrangement of checks and balances that reduce conflicts of interest. This means establishing an ethical code of conduct for board directors, the audit committee and the compensation committee, and having policies in place to ensure transparency and integrity, as well as ethical conduct.
Boards also require an established structure of leadership, as well as an independent Director. This is critical regardless whether the board is combining the positions of CEO and chair or has an individual chair. A strong and independent director is essential in establishing a culture that encourages collaboration and cohesion in the boardroom.
Lastly, best practices in governance require boards to communicate regularly and in a transparent manner with shareholders and other stakeholders. It is crucial to release their financial reports as well as other information easily accessible. It also means providing regular updates on new or changing governance standards, and encouraging a dialogue among the various stakeholders.