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Corporate Governance – Key Elements of Good Corporate Governance

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Governance is the relationship between the company’s shareholders, board of director and management. This framework aligns the interests of all parties and helps the company succeed in its long-term plans. Transparency and accountability are the cornerstones of a good corporate governance. They can build trust between investors, customers as well as employees, and promote a healthy and positive culture.

A good board of directors is composed of a mix of insiders (major shareholders, founders, and executives) and independent members who do not have close ties to the company. The directors from outside have a new perspective and understanding that can be beneficial in making business decisions. They can also serve as a listening board for the insiders, providing them with additional assistance and insight.

Another important aspect of governance is the notion of fairness, which requires the company to treat all employees, vendors, and shareholders equally. This is achieved by the company’s disclosures of information such as major decisions made in the financial report, as well as the outcomes of meetings.

A well-run board must have a method of reviewing its effectiveness and the effectiveness of committees on an ongoing basis. Self-evaluations and surveys can help to achieve this. The board should review the CEO and senior management on a regular basis and, when necessary take part in their evaluations. The board should also set guidelines for its members, committees and senior management. This will ensure that the company’s leaders and members are held accountable for any actions they undertake.

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