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A clearly defined corporate governance framework promotes fairness and transparency and helps your business build solid relationships with shareholders and the public. It helps define roles, guarantees accountability, and permits compliance with regulations and laws. It also helps a company’s long-term growth plan by aligning the interests of shareholders with those of the board and management.
Corporate governance is a complicated concept that is dependent on the goals and culture of your business. A few key concepts to keep in mind are:
Unitary Board Structure
In this system of corporate governance the board of directors is responsible for overseeing and making decisions about company activities. The board is comprised of nonexecutive and executive directors. This type of structure is common in mid-sized and small-sized companies.
Continental Model
A two-tiered system, called the Continental model gives control to a management board as well as an oversight board. The management board consists of the company’s insiders such as executives and managers. The supervisory board is comprised of outsiders like bankers, and union representatives who have stakes in a company.
Stakeholder-Oriented Governance
This type of governance structure, in contrast to traditional structures, which place emphasis on shareholder interests, will consider all stakeholders, including employees, customers and vendors as well as the community. It encourages boards to create meaningful engagement programs and adopt policies that reflect the larger social and environmental concerns. The board should be transparent and open about its decision-making process and make this information available to all stakeholders. It should also ensure that there are clear lines of communication between the board, company management and shareholders.