The Value of Corporate Governance

Corporate governance encompasses a framework of policies, processes, and regulations that guide and regulate a company’s conduct, defining relationships among shareholders, management, the Board of Directors, and other stakeholders. These policies must be consistently enforced to be effective and promote a positive and sustainable business environment. This signals to the market that an organisation is well-managed and aligned with stakeholders’ interests, offering a competitive edge.

Implementing good corporate governance can pose challenges. To assist with this, here are some factors for consideration:

  • Align KPIs for Long-term Value: Prioritise long-term value creation by aligning key performance indicators (KPIs) over short-term gains.
  • Encourage Board Diversity: Promote diverse Boards and evaluate compositions regularly for improvements.
  • Establish Robust Oversight Foundations: Define roles clearly, monitor, and evaluate both Board and management responsibilities for visibility into decision-making processes.
  • Ensure Shareholder Equitability: Uphold equitable treatment of shareholders, considering gender diversity on Boards for enhanced financial performance.
  • Foster Transparency: Provide balanced information to key stakeholders for business confidence, regardless of market conditions.
  • Emphasise Risk Management: Review internal control frameworks periodically and develop comprehensive disaster recovery plans.
  • Uphold Integrity in Reporting: Conduct external audits to ensure credibility and promote ethical behaviour while engaging diverse stakeholders.
  • Facilitate Disclosure on Related-party Transactions: Ensure adequate disclosure of related-party transactions and directors’ external interests, especially where financial interests could influence decisions.

While not always mandatory, establishing a certain amount of corporate governance is advisable for small to medium businesses.

Family-owned businesses can benefit from establishing a governance framework to coordinate among family members and delineate family-business dynamics.

For small and emerging businesses, regular board meetings and appointing an informal ‘chair’ can maintain focus, foster consensus, and mitigate biases. As businesses expand, assessing the Board’s structure and introducing an advisory panel can align with evolving needs.

Accru Felsers has an experienced team of advisors that support their clients with corporate governance. Should you require further information or assistance with your practices, please do not hesitate to reach out to our office.

About the Author
Jean Zhang | Auditing Expert | Accru Felsers
Jean is known for excellent problem solving skills, clear logical thinking and an aptitude for numbers. Most importantly, she is truly dedicated to delivering high quality, accurate accounting advice.